EDITORIAL - coaljunctioncoaljunction.in/appuploads/file/metaljunction/SI_Feb_14.pdfSteel Insights, February 2014 3 Dear readers, The year 2014 has brought with it some “good news”

Steel Insights, February 2014 3

Dear readers,

The year 2014 has brought with it some “good news” and also some “not so good news” for the steel industry. Let’s take a peek at the good news first! Subdued domestic demand and favourable currency exchange rate have made India a net exporter of steel during the first nine months of the current fiscal, after a gap of six years. India exported 4.14 million tons (mt) of steel during April-December, a 9.5 percent year-on-year growth. Experts say the trend will continue this fiscal unless there is quick recovery in domestic demand. Experts, however, also noted that it does not indicate any structural change yet as most steelmakers wanted to ship excess stocks.

Looking at this trend, an industry stalwart said it is important for a country to direct its steel in nation building in the development stage and hence it should focus more on the domestic market. While steel players like JSW Steel, Essar Steel and Steel Authority of India took an advantage of sharp rupee depreciation over August-September period and aggressively increased their exports, Tata Steel chose to focus on the domestic market. Now it needs to be seen how the industry plans its moves in a stable currency situation.

Next “the not so good news”! Steel consumption in India picked up by meagre 1.8 percent (April-December) year-on-year to 53.7 mt as major steel consuming sectors – from automobiles and capital goods through to infrastructure – are facing tough times, reflecting a slowdown in the economy. Also, India’s position in world steel production remained unchanged at the fourth slot in 2013 with an output of 81.2 mt. This is despite India logging the second highest growth of 5.1 percent among the top five producers. There was no change in the order of the top three steel producing nations with China, Japan and the US retaining their slots (in that order) in 2013. India was the fourth largest steel maker in the previous three years as well with a total output of 77.3 mt (2012), 73.6 mt in (2011) and 69 mt in (2010), respectively. It had clinched the third spot in 2009.

Meanwhile, the steel ministry is preparing a blueprint to expand India’s steel capacity to 300 mt from 96 mt at present. But capacity enhancement will only make sense if demand improves. The government also constituted a task force to prepare a blueprint for promoting research and development in the steel sector in a bid to help India treble its steel production capacity.

In the current edition of Steel Insights, we have tried to analyse market voices after government imposed 5 percent export duty on pellets. As India braces to treble capacity, beneficiation of low grade ore and pelletisation become the need of the hour. A balanced approach towards the sector is required; otherwise investments will dry up in the long run. The edition also tried to capture market voices from the forging and foundry sectors.

Happy reading!

(Rakesh Dubey)

EDITORIAL

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4 Steel Insights, February 2014

COnTEnTs

50 | INTERVIEW ‘Foundry needs a parent in the government’IIF working for bringing industry under ambit of Ministry of Small & Medium Enterprises (MSME).

46 | INTERVIEW Vikrant forges a secure future Vikrant Forge bullish on Indian market and feel it will grow at a faster clip in next two years.

41 | INTERVIEW ‘Our focus is innovative conveying systems for mining applications’Bevcon has drawn a clear strategy for next 5 years for high capacity conveying space.

30 | COVER STORY Indian pellet-makers’ palette of woes Government’s imposition of 5% export duty on pellet has divided the steel industry.

10 | SpECIAl FEATuREIron ore scarcity still hunts Analysts feel production to decline marginally in FY14 but rose 10-12% in FY15.

6 Iron ore exports to go up as Goa prepares for e-auction

14 Sponge iron expects demand sheen to return

16 Will green signal start Posco’s project 18 Two-wheelersegmentfindsthegoing

slightly easy 20 Construction industry outlook negative

for 2014 22 Negative sentiment, sticky prices put

pressure on realty sector 24 Coking coal continues ‘slide’ show in

January 26 Flat steel producers play on low import,

input costs 28 Longsteel,semi-finisheddemand

remain volatile 29 Tata Steel launches 2 branded ferro

alloys 39 RSP doubles production capacity with

slab caster from SMS Siemag 40 Siemens continuous caster starts

operation at JSPL 52 JSW Steel Q3 net drops 47.3% 53 RINL sales increase 12% in January

y-o-y 53 Outokumpu bags 700-tons order in India 53 JSPL Angul plant construction on track 54 Traffichandlingbymajorportsup1.91%

in April-December 55 Railways’ iron ore handling up 4.34%

m-o-m in Dec 56 Global crude steel output up 1.43% in

December m-o-m 57 India remains 4th largest steel producer

in 2013 58 Price data


sPECIAL fEATuRE

Iron ore exports to go up as Goa prepares for e-auction

Steel Insights Bureau

India’s iron ore exports are set to increase as Goa prepares to auction unsold stocks, following the easing of a ban on sales of

the steel-making raw material.“Bids will be invited for about 15 million

tons of inventory that will be offered through online sales starting next month,” Goa’s Mines Director Prasanna Acharya said. “The buyers will be allowed to ship the ore overseas or sell locally,” he said.

The Supreme Court, in November, had allowed sales of mined ore in Goa, while continuing the ban on extraction because of environmental concerns. Goa was the nation’s biggest iron ore exporter before the ban was imposed in September 2012.

Goa’s mines department has sought applications from prospective bidders and it is expected to have the first auction in February, Acharya said. There is no timeline for completing the sale of the entire quantity.

The revival in Goa’s exports comes as iron ore shipments from India are poised to tumble for a fourth year to less than 10 million tons in the year ending March from 18 million tons a year earlier.

Government curbs, mining bans and higher export taxes are prompting buyers to secure the raw material from other producers.

Sesa Sterlite Ltd, which owns its biggest iron ore mine in Goa, and rival miners mainly export their low-grade produce to China as steel-makers in India mostly lack the ability to process poor quality ore.

Steel firms register

Over a dozen steel firms, including Jindal Steel & Power (JSPL), Bhushan Steel and JSW Steel, have registered themselves with the Indian Bureau of Mines as the Goa government is all set to start the process of e-auctioning of around 15 million ton of iron ore lying idle in its stockyards.

Goa’s ore under auction could support 7million tons of steel capacity annually.

The Supreme Court appointed a three-member monitoring committee to oversee the e-auctioning process and said that the proceeds from the sale will be kept in a separate fixed deposit account by the Goa government till the apex court finally decides on the matter.

However, the base price will be decided on the basis of iron ore grades.

The auction will take place along similar lines of Karnataka. Goa’s ore has more than 55+Fe content, industry sources said.

The domestic steel mills have traditionally preferred ores with higher iron content but are now also developing technology to use the low-grade ore.


sPECIAL fEATuRE

Indian steel-makers are raising their iron ore beneficiation and pelletisation capacities as they seek to expand the range of ore that their plants can handle.

India has about 36 iron ore pelletisation plants operated by steel companies as well as standalone raw material companies such as KIOCL (formerly Kudremukh Iron Ore Company) with a combined capacity of around 62 million tons.

Goa used to be India’s top exporting state, with sales of more than 40 million tons a year, mostly to China. But it has not produced or exported any ore since the Supreme Court imposed a ban to curb illegal mining. Recently, the government imposed a five percent tax on the export of iron ore pellets that may put brakes on the expansion plans of the country’s pelletisation industry, worth around `50,000 crore.

India’s exports languish

Meanwhile, India’s iron ore exports have gone down by 28.16 percent during April-December of the current fiscal to 11.17 million tons as gloom continues to hang over the sector due to the present regulatory scenario, according to the mineral industries body, the Federation of Indian Mineral Industries (FIMI).

India, once the third-largest exporter of iron ore, had exported 15.55 million tons of the mineral in the corresponding period of last fiscal, according to FIMI data.

“We expect the situation to continue as long as the government policy does not change. There is total gloom in the sector… no ray of hope,” FIMI Secretary General R K Sharma said.

He added that this year’s iron ore exports are expected to come down by 20 percent to about 14-15 million tons from the levels of 18.37 million tons in 2012-13.

Paradip (4 million tons), Vizag (3.84 million tons) and Haldia (1.58 million tons) are the major ports from where exports of the minerals were taking place, FIMI data showed.

Indian iron ore exports have been badly hurt badly in the last few years due to mining bans in Goa and Karnataka, which led to a drastic fall in domestic production as well.

Increase in the export duty to 30 percent on both types of iron ore, lumps and fines, in December 2012, had also impacted the sector.

At present, low grade iron ore (or fines) are being exported from Odisha, Jharkhand, Rajasthan and Madhya Pradesh as mining is still banned in Goa. Export of the mineral is not permitted from Karnataka at present.

A few days back, the Goa government had issued a notification to sell about 15 million tons of iron ore through exports, as per a Supreme Court order. Industry is estimating that India’s total iron ore production in the present fiscal will be around 130-140 million tons, almost the same as last year.

Rusty global outlook

Iron ore may have outperformed other commodities last year, but the price of the metal used in making steel looks set to decline this year as China’s growth slows.

China’s continued heavy spending on subways, bridges and other infrastructure kept demand for iron ore high last year. Exports to China from Port Hedland, Australia’s main shipment point for the metal, increased by 34 percent to 256 million tons. Overall, shipments of iron ore – including to Japan and South Korea – rose 26 percent to 318 million tons. Exports of the commodity reached record levels in December.

Many analysts and traders have been surprised by the way iron-ore prices, buoyed by record Chinese demand, held up throughout 2013. Prices of other industrial commodities, such as nickel and coal, have tumbled, but iron ore has largely remained above $130 a ton.

Although prices are still about a third lower than their all-time peak three years ago, they remain well above the sub-$90-a-ton level they sank to in 2012 as China’s economy stuttered.

But a less bright outlook for China’s economy this year, coupled with new iron-ore mines going online in Australia, is threatening to drag down prices this year. A decline would dampen the outlook for companies at a time when exports from India may see some uptick with the auctioning of stockpiles in Goa.

Sesa Sterlite to resume sales


Sesa Sterlite Ltd, which restarted its iron ore mines in southern India last month, will shortly resume sales of the steel-making ingredient from the region after a halt of more than two years.

The company plans to start auctioning iron ore mined in the state of Karnataka shortly, officials said.

The company, which was the biggest Indian exporter of the commodity until the court-ordered ban, may sell about 100,000 tons of ore in its first offering, industry sources said.

Sesa Sterlite, controlled by billionaire Anil Agarwal, saw revenues from its iron ore business collapse after the nation’s courts ordered mining bans in Goa in October 2012 and Karnataka in August 2011, as part of probes into illegal mining and environmental degradation.

Iron ore mining accounted for 98 percent of earnings at Sesa Goa Ltd, which, in August, merged with sister company and zinc, copper and aluminium producer Sterlite Industries (India) Ltd to form Sesa Sterlite.

Mining in Goa is still suspended although companies have been allowed to sell inventory. The resumption in Karnataka will help ease shortages faced by local steel-makers.

The company, owned by London-listed Vedanta Resources plc, has approval to produce as much as 2.29 million tons (mt) of iron ore a year, industry sources said, adding that output in the first three months of 2014 may reach 1.2 mt-1.5 mt from the restarted Karnataka mines.


bidder has to bid over and above the base price and is liable to pay 10 percent royalty and 12 percent forest development tax, unlike other places where it is borne by mining companies,” KISMA said.

The Bangalore Chamber of Industry & Commerce (BCIC) has also joined the protest along with the Association of Indian Mini Blast Furnaces. In a letter to Karnataka Chief Secretary H V Harish, President, BCIC, said: “This arbitrary way of putting abnormally high base prices is resulting in huge profiteering for the lessees.”

Miners hit back The ongoing blame game between Karnataka’s iron ore producers and their clients reached a new pitch with the mine-owners launching a counter tirade against the steel companies.

Mining industry body Federation of Indian Mineral Industries (FIMI) denied that a mining cartel was selling ore at high prices in the state or causing short supply of ore. On the contrary, it alleged that three to four steel majors had formed a cartel and had artificially kept iron ore prices low in the Karnataka auctions.

FIMI Vice-President Basant Poddar and Managing Director of Sesa Sterlite (formerly Sesa Goa) Prasun K Mukherjee rubbished steel companies’ allegations against mining firms and said the prices were market driven.

“The quantities fixed by the Supreme Court for each mine lease (are too) insignificant for any one mining company to dictate prices or think of cartelisation. Moreover, the mine owners have been fixing the reserve price after clearance from the Supreme Court and all approvals from government.

“It is astonishing to see this weird allegation when 70 percent of the iron ore in the e-auction is being supplied by the National Minerals Development Corporation, a Government of India company (whose) reserve price is abysmally low compared to private mine owners.”

“The steel industry is selectively targeting Karnataka mine owners,” Poddar and Mukherjee said. In the last two years, some steel plants had bought two million tons of ore from the eastern states at high prices; whereas a similar quantity of ore lumps and fines of private mines and NMDC remained unsold in the Karnataka auctions.

Iron ore scarcity still hunts India

Tamajit Pain

India’s Minister of Steel, Beni Prasad Verma, recently said production of iron ore in the country has been above the

domestic requirements during the last three years.

In a written reply in the Rajya Sabha, Verma said the decision regarding imports of iron ore is taken by the individual steel producers based on their requirements.

The fact that iron ore is still scarce is evident from the ongoing spat between large steel players and miners.

Large steel players like JSW Steel, Mukand Steel, Kalyani Steels, Kirloskar Ferrous and BMM Ispat are up in arms against alleged price fixation of iron ore in Karnataka. The companies have come together and are preparing to file an affidavit in the Supreme Court against private miners for allegedly forming a cartel and jacking up ore prices.

With general elections round the corner, steel companies under the Karnataka Iron & Steel Manufacturers’ Association (KISMA) have joined forces with the Karnataka Sponge Iron Manufacturers’ Association (KSIMA) to keep the pressure on the state and central government, given the politically sensitive nature of the mining industry. Together, they are also planning to protest in a big way through public demonstrations and advertising campaigns.

“It is a helpless situation for the steel industry. The ore pricing in Karnataka is simply unviable. The January price of `5,000 per ton is historically the highest-ever, up from

`2,250 to `2,475 in September 2013. Even in 2008, when prices went up to $180 per ton, ore prices did not reach this level. Except for state-owned NMDC, other miners have formed a cartel and are increasing the base prices of ore in the e-auctions,” said Seshagiri Rao, Joint Managing Director (MD) and Chief Financial Officer (CFO) of JSW Steel, which is the largest steel plant in the state.

While state-owned NMDC, the country’s largest miner, decides on the base price for the ore it produces, the Supreme Court has allowed the base price, quantity, quality etc to be decided by the lessees.

S Shah, Joint MD of Mukund Steel, which is operating at barely 60-70 percent of its current capacity, said it is extremely unfortunate that the steel industry has had to go through such a crisis after investing nearly `80,000 crore in the state.

Steel companies are planning to file an application with the Competition Commission of India (CCI) against alleged cartelisation by private mine owners. They will also demand setting up of an immediate regulator to keep a close eye on and monitor sharp movement in the e-auction prices of iron ore.

Due to the ore crisis, a number of sponge iron units too have closed down in Karnataka, while the rest are operating at only 15-20 percent capacity.

K Satya Prasad, Secretary, KSIMA, said: “Some of the lessees have formed a cartel with the base prices nearly 70-80 percent over NMDC prices, even as ore prices are stagnant in Odisha and have fallen by 13 percent internationally.” To add to it, “the

Production, export, consumption of iron ore in million tons

Year Iron ore production

Domestic Consumption/ Requirement (e)

Iron Ore Import *

Iron Ore Export *

Share of Export with production

2010-11 207.16 107.22 1.87 97.66 47.1%

2011-12 168.58 100.57 0.97 61.74 36.6%

2012-13* 136.02 103.40 3.05 18.37 13.5%Source: Production/Consumption - Indian Bureau of Mines, Ministry of Mines; Import/Export - MMTC, Ministry of Commerce; * Provisional; e Estimated

sPECIAL fEATuRE


sPECIAL fEATuRE

They alleged that currently only 21 of the 115 mines in the non-C category were operational in the state. Of the 12 million tons produced since April 1, 2013, the cartel of three to four private steel majors bought almost 75 percent of Karnataka’s ores through the e-auctions and artificially depressed the prices of ore sold by NMDC.

“Any cartelisation is on the buying side,” Mukherjee said, adding the artificially low price in the absence of a large number of buyers subverted the very objective of e-auctions. The government was also losing some of the revenue due to it as royalty and taxes. Iron ore productionAs per the report of the Working Group on the Steel Industry for the 12th Five-Year Plan, the iron ore requirement for the year 2013-14 is 149.43 million tons. However, requirement had been much below expectations till the last fiscal.

Analysts feel that India’s iron ore production will witness a minor decline in the fiscal ending March 2014. But it is set to witness a moderate growth of 10-12 percent to touch a level of 150 million tons in 2014-15. The growth in production during the next year is likely to come from Karnataka and Goa, while production cap in Odisha will restrict further growth.

According to miners and analysts tracking the sector, the majority of growth will be seen in Karnataka, where several mines are in the final stages of securing regulatory approvals.

The biggest among all, Sesa Sterlite, started production towards the end of December 2013. Other mines like NMDC are gearing up to increase production and companies like Mineral Enterprises Limited are awaiting renewal of their mining leases.

“Unless Goa restarts mining, though

partially, we cannot expect a big jump in iron ore production next fiscal. Many more mines are set to restart in Karnataka and the total production is unlikely to exceed 20 million tons. There is a big suspense over production caps in Odisha based on the Shah Commission recommendations. In total, we can expect around 150 million tons of production next fiscal,” Basant Poddar, Vice-President, FIMI, said.

Production of iron ore in 2013-14 is likely to remain flat at around 135 million tons, same as the previous year, or it might even decline by 3-5 percent, said analysts.

The output will be flat on a year-on-year basis in 2013-14 as Goa was out of business. Jharkhand and Chhattisgarh have more or less remained flat in the current year till now. In Karnataka too, production is yet to pick up as many leases are still awaiting clearances, sources said.

ASSOCHAM calls for review of e-auction systemMeanwhile, apex industry body ASSOCHAM has urged the government to review e-auctioning of iron ore and provide long-term iron ore linkages to protect the interest of the domestic iron and steel industry.

‘’The e-auction of iron ore has to provide relief to India’s iron and steel industry. Otherwise, there will be an adversely effect, more so as lack of raw material would be a major cause for tardy progress of both greenfield and brown-field steel capacity expansion projects,’’ highlighted The Associated Chambers of Commerce and Industry of India (ASSOCHAM) in a communication addressed to R H Khwaja, Secretary, Ministry of Mines.

‘’There is a need to adopt a holistic development approach for ensuring smooth

supply of iron ore, thereby harnessing the growth of the iron and steel industry,’’ said D S Rawat, Secretary General of ASSOCHAM.

Iron ore production in FY2013 was 136 million tons, out of which 42 million tons was captive production while 18.4 million tons had been exported and about 76 million tons of total iron

ore was available for the relevant market for non-captive steel producers.

Supply of an important raw material like iron ore is required for non-captive users as well and they cannot be ignored, noted ASSOCHAM.

It also noted that in case of e-auctioning, the quality of raw material cannot be assured and it will always remain fluctuating as each time it would come from multiple sources and create problems in the operations of blast furnaces and steel melting furnaces, thereby leading to high coal and energy consumption.

Besides, ASSOCHAM also shared its concerns over the inflow of new investments in the domestic steel sector as setting up of integrated steel plants involves huge finances.

‘’It is almost impossible to commit large financial resources without having security of iron ore supply which is a critical raw material for operating steel plants,’’ highlighted ASSOCHAM. ‘’Besides, in India, even banks do not provide financial closure to projects without secure sources of raw materials.’’

Will India resolve iron ore scarcity issue?Now the big question is whether India will be able to solve the iron ore scarcity problem as the country increases its steel production capacity to over 100 million tons in a year’s time.

All eyes are also on what action would be taken on the Shah Commission report on Odisha.

The Shah Commission, while arguing for preservation of minerals like iron ore, had mentioned that China, despite having 200 billion tons of iron ore reserves, was importing ore from India and other places to shore up its stocks. The commission feared that, if allowed to be exploited at the present rate, the iron ore reserves in Odisha would be exhausted in 30 years. Hence, it favoured capping the iron ore production to below 55 million tons and also putting restrictions on exports.

Odisha is the largest producer and supplier of iron ore in the country. In 2012-13, it accounted for nearly 45 percent of India’s total iron ore production.

Similarly, the proposal to restrict export of iron ore has been opposed by the Union commerce ministry on the plea that it would affect foreign exchange earnings adversely.

State-wise production of iron ore(in million tons)

2009-10 2010-11 2011-12 2012-13 2013-14*

Chhattisgarh 26.21 29.32 30.45 27.94 30

Goa 38.13 35.56 33.37 10.57 11

Jharkhand 22.54 22.28 18.94 17.97 19

Karnataka 43.16 38.98 13.18 11.22 15

Odisha 80.89 76.12 67.01 64.19 50

Others 7.62 4.89 4.33 3.96 4

Total 218.55 207.15 167.28 135.85 129* Industry projections Source: Federation of Indian Mineral Industries

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range-bound between $125 and $135 a ton, coal and other energy costs have gone up.

Steel mills have decided to pass on the rise to consumers with a proportionate increase in their product prices with immediate effect.

“With the lowering of capacity since June, sponge-iron inventory has dried completely. Any upsurge in demand will benefit makers with a proportionate increase in margins,” said a sponge iron maker based out of Chhattisgarh. Steel demand in the past month has risen seven percent.

Many mills in the north have shut down their plants due to lack of electricity. Now they have gradually started coming on stream with the restoration in power supply. So, sponge-iron demand will continue its rising momentum, said Sharma.

Meanwhile, the government has proactively intervened (through the Cabinet Committee on Investment) to clear major investment projects, which is key to reviving the investment cycle. With expected commencement of investments in industrial and infrastructure projects post-general elections, Indian steel demand is expected to improve in FY15.

Sponge iron expects demand sheen to return


The sponge iron industry expects demand to revive after its first increase in January after a period of

seven months of drawdown. The sector, expected to be of the size

of `40,000-crore with many small players operating within its ambit, has seen signs of revival in January with producers having seen a spurt in demand from steel mills.

The past seven months have seen the worst phase on non-availability of iron ore due to the mining ban in Goa and lower mining production in Karnataka.

Used as a raw material for steel-making, the demand for sponge iron has reduced due

to fewer projects announced for construction. As a result, producers have reduced utilisation to 30-35 percent in seven months. With 18.7 million tons of production, the sector recorded 50 percent utilisation during FY’13 compared to 20.6 million and 58 percent of utilisation a year ago.

“Demand has revived suddenly, in a month. Therefore, makers have raised prices by 3-5 percent this month,” said V R Sharma, President of the Sponge Iron Manufacturers Association and Deputy Managing Director of Jindal Steel and Power (JSPL).

Sponge iron is quoted in the range of `19,000-20,500 a ton. The price of pig iron, also used for steel-making, moved up to `25,500 a ton. While ore prices have been

Sponge iron sector figures(in million tons)

particulars 2011-12 2012-13 % change

Output 20.56 18.67 -9.18

Installed capacity

35.31 37.31 5.66

Capacity utilization (%)

58.22 50.05 0

Sponge iron prices on Jan 31, 2014

place 31-Jan m-o-m

Durgapur 20500 -200

Raigarh 20000 300

Raipur 21000 700

Rourkela 19200 800

Basic price (ED and Taxes extra)


fEATuRE

environmental clearance, the environment ministry has delinked the port from the steel plant. The company had received an environment clearance for the captive port in May, 2007. But the five-year validity of the permission has expired. Though the Odisha government has submitted the coastal regulation zone (CRZ) compliance report according to the revised guidelines, the renewal of environment clearance of the port project is yet to pass the environment ministry’s scrutiny.

Some industry experts feel the captive port is crucial for the start of work on the POSCO plant as the company will bring heavy equipment through this port. Besides, the sand dredged from Jatadhari Muhan (the location of the port) will be used to raise the ground level of the plant site, which is very shallow. In other words, building of the port will precede the steel plant. So, with no environment clearance for the port as of now it is difficult to start work on the steel plant.

The company is also in a quandary over the direction of the environment ministry to spend five percent of the project cost on social commitments in the site area. This is expected to push up the project cost by about `2,600 crore.

The Odisha government last year had asked POSCO to spend about `250 crore to upgrade the socio-economic infrastructure in the site area. However, the company had evaded the task on the plea that it will be difficult to get the board’s approval for such a large amount when it was not assured of land and mines to take the project forward.

Some industry sources feel it would be difficult for the company to spend ten times of that amount without any substantial change in the status of the project. All eyes are now on the clarity on the issue and framing of necessary policy guidelines by the government.

The Odisha government’s MoU with POSCO expired in June 2010, but it has not been renewed yet. With the law department opining against renewal post-facto, the state government had decided to enter into a tripartite agreement with POSCO India and its Seoul-based parent, which will replace the earlier MoU. Though the negotiation for this pact ended more than two years ago, the document is yet to be inked.

Thus, for POSCO, the long journey to producing steel in Odisha isn’t over yet.

Will Green signal start POSCO’s project?


Prime Minister Manmohan Singh recently said work on the long-delayed integrated steel plant of POSCO in

Odisha will begin in a few weeks. Singh also assured South Korean President Park Gyun-hye in New Delhi on similar lines. His statement might have brought some cheer to the visiting Korean delegation and contributed to the success of the bilateral trade talks, but those on the ground know there are still large hurdles ahead.

The Prime Minister’s optimism was based on the recent revalidation of the environment clearance of the project by the Union Ministry of Environment and Forests (MoEF) and the fresh recommendation by the state government to the Centre for granting prospecting licence to POSCO for the Khandadhar iron ore mines. Industry sources say getting land or the environment clearance is not a big issue but the company should be more bothered about the raw material for the project.

Ever since it signed a memorandum of understanding with Odisha in 2005, the South Korea-headquartered steel-maker has stuck to its position of “no mine, no project”.

Though the Odisha government has submitted a fresh request to the Centre for the Khandadhar mines, getting the mining rights is still fraught with a lot of problems. While disposing of a case related to the prospecting licence for the Khandadhar mines in May last year, the Supreme Court had asked the Union mines ministry to take up POSCO’s case but with the rider that the ministry would have to consider “all objections raised by various parties”. It may be noted there were 226 claimants of these mines before the matter went to court. So, the process of eliminating objections and allotting the prospecting licence to POSCO may take a long time, point out analysts. There is also the possibility of some dissatisfied claimants going to court and stalling the process again.

Layers of clearanceEven if POSCO gets the prospecting licence, the next stage of getting a mining lease will be more arduous as then forest and environment issues will come into play. Khandadhar being a scheduled area and with a precedent like Niyamgiri, the forest diversion and environment issues are likely to be decided through gram sabhas (village committees).

Already, local protests are building up in Khandadhar to POSCO’s proposed mining plan. These will only get shriller once the gram sabhas take up the matter, hurting POSCO’s chances to start mining iron ore.

Typically in India, from the grant of a prospecting licence to the start of mining, it takes eight to nine years. So POSCO has to look for raw material linkage from alternative sources before it can operate its own mines if it builds the plant in the next three to four years, industry analysts say.

The company has held preliminary discussions on sourcing raw material from state-owned Odisha Mining Corporation in the event of a delay in operating its captive mine. But POSCO may be sceptical about depending solely on the state-owned miner.

To add to POSCO’s woes, there have been persistent strikes by local villagers at the plant site. Earlier, it was the protracted agitation by the POSCO Pratirodh Sangram Samiti that delayed land acquisition for the project. Now, the villagers of Gadakujang and Nuagaon panchayats, hitherto known to be supporters of the project, have demanded fresh compensation and raised livelihood issues.

Thousands of villagers, including those to be displaced in Polang, Noliasahi and Bhuyianpal villages, were on mass dharna recently, threatening to bring down the boundary wall that is being constructed around the acquired land.

Hurdles more complicated After captive mines, the next roadblock is the captive port. While revalidating the


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volumes in the LCV segment contracted by 24.5 percent during the same period. “In terms of market share, Tata Motors has gained some its lost market in the M&HCV (goods) segment in the first nine months of 2013-14, while its market position has weakened in the LCVs (goods) segment as slowdown has caught up with the sub-2 tons category where it commands a strong market share. In contrast, the 2-3.5 tons segment has witnessed strong growth where M&M has relatively strong market position with its wide portfolio of pick-up trucks,” the ICRA report added.

Raw material prices a concern

Raw martial prices, meanwhile, continued to be a matter of concern for the industry as most of the companies procure raw material through import. In most cases, the automobile companies tried to balance the costs by passing the hike to customers. Despite this, it continued to impact the financials of the companies.

For example, higher raw material prices impacted the earnings before interest, taxes, depreciation and amortisation (EBIDTA) of Hero MotoCorp Limited during the third quarter of 2013-14 at 13.06 percent.

Pawan Munjal, Managing Director and Chief Executive Officer of Hero MotoCorp Limited, said in a statement, “Despite better sales and increasing net profits during the quarter, our EBIDTA has been affected due to partial recovery of rising raw material costs and currency fluctuation.”

It is the same story at MSIL and General Motors India who procure a large portion of their raw materials through imports. For GM, the amount is almost 70 percent.

In this scenario, the companies do not rule out the possibility of procuring steel from the domestic market. “We can procure steel from the domestic market if the pricing is right and the quality of steel is up to the mark,” an official from MSIL told Steel Insights.

General Motor believes in a wait-and-watch policy, as P Balendran, Vice-President, General Motor India told Steel Insights, the company may increases its local steel sourcing from a present 30 percent share depending on economic conditions.

Two-wheeler segment finds the going slightly easy

Priyalina Basu

Early trends in the January 2014 sales for the automobile sector show that the journey for car manufacturers

continued to be bumpy, though the two-wheeler segment had an easy ride. Complete segment-wise sales report for the month of January 2014, however, is yet to be published by the Society of Indian Automobile Manufacturers (SIAM).

During January 2014, most of the leading car manufacturers such as Maruti-Suzuki India Limited (MSIL), Hyundai Motor India Limited (HMIL), Mahindra and Mahindra Limited posted a dip in sales due to subdued market conditions in India and abroad though Honda Cars India Limited (HCIL) posted a three-fold increase in sales on the back of strong demand for Honda City and Honda Amaze. On the other hand, most of the leading two-wheeler manufacturer such as Hero MotoCorp Limited, TVS Motors, Yamaha Motor India reported a surge in their January 2014 sales on a year-on-year basis, except Bajaj Auto.

In December 2013, the two-wheeler segment posted volume-wise growth for five consecutive months, said a report from ICRA and for the first nine months, two-wheeler sales registered growth of 5.40 percent over April-December, 2012, said data from SIAM.

The reason for the increase in sales in the two-wheeler segment is a surge in demand for scooters. According to an ICRA report, during the first nine months (April-December) of the current financial year (2013-14), the scooter segment expanded its share by 24 percent in the total two-wheelers volume.

The motorcycle segment, however, received lukewarm response during the period and has undergone a change in the

growth dynamics. According to ICRA, growth of the 125cc segment, the fastest growing sub-segment even a year ago (2012-13), contracted 22.7 percent y-o-y in December 2013 alone as the entry-level 100 cc continued to get better response.

According to the report, MSIL increased its market share in the domestic passenger car segment during the first nine months of the current financial year to 41.3 percent compared to 39.1 percent on the back of steady volumes of Alto, Swift DZire, Swift and WagonR. MSIL is followed by HCIL and HMIL. In comparison, Tata Motors, Mahindra & Mahindra Limited and Toyota have been the biggest market share losers during the period under review.

Commercial vehicles: Blues continue

For the commercial vehicles segment, slowdown continued even faster as demand for light commercial vehicles (LCVs) came off the cliff during December 2013. The domestic commercial vehicles (CV) industry ended with another month of depressed sales volumes as reflected by a decline of 25.5 percent y-o-y in December 2013. In comparison to the first nine months of the previous year (2012-13), slowdown in 2013-14 was sharper as small commercial vehicles (SCVs) also came under the grips of a cyclical slowdown, following almost five years of strong growth, due to saturation of demand across metros and tier II and tier III cities.

Of the commercial vehicle segments, the medium and heavy commercial vehicles (M&HCV) segment sales continued to decline for almost two years in a row, reflecting the impact of weak economic activity, subdued industrial activity and low freight and cargo availability.

The M&HCV segment contracted 27.9 percent during December 2013, while sales

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spending on construction and infrastructure have had come to rescue in times of a crisis. This sector has a strong multiplier effect. The government should look into the obstacles,” said an analyst with a broking firm.

Current woesFor the majority of companies, aggressive bidding at low margins has reduced surpluses from operations. This coupled with increased input costs (labour, cement, sand) and lower revenue growth has resulted in under-absorption of fixed costs. In many cases, EBITDA margins have deteriorated and operational cash flows have become negative.

“Aggressive bidding leading to low EBITDA margins has squeezed liquidity, especially where a significant portion of

the order value, close to the EBITDA margin, is locked up as retention money,” said a report by India Ratings.

As mentioned, these factors together have slowed down order execution. There have been a significant slowdown in execution since 2013 and the industry expects the trend to continue in 2014.

“Order execution will continue to be sluggish in

FY15 due to reduced ability of companies to fund working capital and delays in statutory clearances. Consequently, the aggregate revenue growth of the sector will continue to decline, with some companies facing a fall in revenue,” the report said.

RemediesAccording to analysts, the government needs to pay immediate attention to the stagnated order execution in the construction sector. “This sector is a major employer and this fact should be kept in mind during a slowdown.”

To improve fund availability, the government needs to encourage investments in the sector by framing investor friendly policies and removing hurdles. A major concern is the delay in project clearances. There is hope that clearances may be expedited following a change of guard at the Ministry of Environment and Forests (MoEF). Also, the Supreme Court’s verdict on de-linking environmental clearance from forest clearance will help start execution in non-forest land and provide temporary momentum in the roads sector.

“Overall, the revival in the construction sector will depend largely on the economic recovery. The government needs to continue reforms and take pro-growth measures by removing procedural hurdles. That said, we don’t see much action on this front till the elections in May,” the analyst said.


The Indian construction industry is passing through a difficult phase. On one hand, long gestation period

and falling margins are making construction projects rather unattractive for the private sector. On the other hand, the public sector is facing fund constraints and desperately needs private participation. As a result, growth in the sector is dwindling from the high figures reported in pre-2008 period. The analysts now hold a negative outlook for the year 2014.

Currently, the major problem facing the sector is the increased working capital requirement and drying up funding sources. The receivable days have been continuously deteriorating since the last three years, thus stretching the liquidity position of companies and leading to an increase in working capital debt. Due to the increased corporate debt and also default, banks are becoming wary of lending to the sector. This is putting further pressure on companies who are stuck up midway through the projects. Going forward, say analysts, the sector may see an increase in the number of stuck up projects if liquidity situation does not improve.

“This is a cause for concern for the economy as a whole. In past, increased

Sources: India Ratings

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60

80

100

120

140

FY10 FY11 FY12 FY13 H1FY14

Receivable days Inventory/WIP days

Receivable days and WIP days for select companies (in days)

Construction industry outlook negative for 2014


speculative factor in the market, but this is often underestimated,” he said.

In fact, prices have been on a steady rise since 2008-09. Neither the global recession and industrial slowdown, nor the higher interest rates and tight monetary policy of the Reserve Bank of India (RBI) could dent the bloated prices. As a result, the margins of the realty firms have remained protected despite adverse market conditions.

“In 2014, we don’t see any massive change in that equation. A price correction has been a talking point, but we need to appreciate that so long as speculative demand stays, the market would survive the falling end use demand,” the expert added.

Margins are stable There are many odds, as mentioned, for the players in the realty market. However,

the firm prices have saved the day for them in 2013, despite an increase in raw material costs, the general inflationary pressure and high borrowing costs.

According to a report by India Ratings & Research, while revenues were stagnant for most of the major players, the EBITDA margins were stable in 2013.

DLF Ltd reported a net profit of Rs 83 crore in the quarter ended September 2013, compared to a loss of Rs 19.5 crore in the year ago period. Similarly, Ansal Properties recorded a 17.9 percent growth in net profit for the first half of 2013-14 over the same period previous year. Barring the exception of Unitech Group, most other leading players saw a positive growth in margins during the April-September 2013 period.

As a result of stable margins, the outlook on individual companies remains stable even though the sector specific outlook is somewhat negative.

Election may be a game-changer While much of the industry expects to see continued slowdown in demand in 2014, there is a consensus that the general elections in May could bring fresh blood into the market.

“If there is a strong verdict in favour of any party, the market should receive a boost. We expect to see some activity post-elections,” an analyst said.

However, the impact is not likely to be prompt and would come only with a lag. The commercial property segment would be the first to get a boost before the residential segment sees a recovery in demand, he added.

“There is a risk too,” he said, “if the elections fail to give any clear verdict the market could respond with an adverse movement. And in this case, the impact would be rather prompt.”

Arindam Bandyopadhyay

Expect the expected in the Indian real estate industry, say analysts. Low demand, high prices, increased

debt. Overall, a negative outlook is what the industry is assigned for calendar 2014 and also for fiscal 2014-15.

Blame it on the inflexible prices, the analysts say, for the stagnated sales, but don’t blame the market players doing a tight rope walking between increased debt and increased investment inflow, at the same time.

“There is sort of a paradox in the realty market today. On one hand, there is perceptible downward trend in sale of new units over the last one year. On the other hand, prices remain firm despite low economic growth and falling disposable income,” said an industry expert.

“Prices showed some weakening in the first half of 2013-14, but the trend reversed thereafter. One reason of this could be the NRI funds which switched to realty following the imposition of import duties on gold last year. Actually, there is a strong investor or

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100

120

140

DLF NationalBldg Const

Sobha Dev PrestigeEstates

HDIL MahindraLifestyle

SamruddhiRealty

OPM NPM

Profit margins for select realty cos in Q2, FY14 (%)

Source: BSE

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Realty check for 2014

Negative sentiment, sticky prices put pressure on realty sector


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The sea-borne coking coal market continued its downward rally in January as demand remained

sluggish and there was little interest for fresh procurement. According to market sources, prices softened in the absence of Chinese buyers who were busy preparing for their New Year holidays starting January 31.

Spot prices dropped by $5-6 per ton FOB Australia during the month under review. The premium variety was quoted at $125 per ton FOB Australia on January 29, down from $131.5 per ton FOB on December 31. Peak downs prices eased to around $126.5 per ton FOB on January 29 from $133 per ton FOB on December 31. The semi-soft variety closed lower at $87.5 per ton FOB on January 29, compared to $92 per ton FOB on December 31.

As mentioned, the current phase of weakness in prices became prominent in late December, primarily due to little activity in the Asia-Pacific met coal market. In fact, the market expected the December price trend to continue in January. In December, market analysts had forecast that “coking coal prices may see further decline in January in the event of normal supply and continued sluggishness in Chinese demand.”

Chinese demand for coking coal has remained subdued since the onset of winter in November. Apart from the New Year festivities, another major factor leading to the softness in coking coal prices was the expected slowdown in China’s steel industry growth. Recent reports said the output growth in China’s steel sector may come down to around three percent in 2014 from an estimated 7.8 percent in 2013. It is also envisaged that the authorities will focus

Coking coal continues ‘slide’ show in January

on cutting excess capacity and the severe pollution menace could result in the closure of a number of steel mills. Adding to this, the outlook for the power supply position and general economic health remains grim.

Market sources said prices may see further decline after the Chinese New Year holidays. “There is no point in booking cargoes now. Fresh bookings are expected only after this break,” a source said.

Overall, he said, there is a significant oversupply situation in the market which would continue to drive prices lower. The market glut could well bring down the next quarterly contract to below $140 per ton level from the first quarter contract at $143 per ton FOB Australia. BHP Billiton-Mitsubishi Alliance (BMA) has offered January-March pricing at $143 per ton FOB, a price which was accepted by some steel-makers.

In India, demand for coking coal from the steel industry is expected to see an uptick in the coming months. Steel prices have shown marginal improvement of late.

Also, the downtrend in coking coal prices contrasts with other major steel-making raw materials like iron ore, which have been range-bound at $130-145 per ton CFR China for the last five months. The high prices of ferrous scrap, an alternative material for secondary steel producers, also augur well for met coal demand. Only recently, an Indian delegation led by the Steel Minister Beni Prasad Verma visited Australia seeking long-term purchase agreements for coking coal for the domestic steel sector.

Going forward, coking coal prices may witness a flat trend in February, thanks to the poor sentiment in the Chinese steel sector, trading sources said.

Met coke prices ease in JanuaryIn line with the softening in coking coal prices, imported met coke rates dropped by $7 to close at $265 per ton CFR India on January 29 from $272 per ton CFR on December 31.

In the domestic market, met coke prices hovered at around ̀ 17,000 per ton in January, market sources said.

Lately, demand for the material in the domestic market witnessed some growth due to an increase in steel production, sources said. However, despite a slight improvement in demand, actual realisations have not changed much because imports are continuing at low prices.

Datespeaks Down (CSR 74%, VM-

20.7%, Ash-9.7%, S-0.6%, p-0.03%, TM-9.5%)

prem low Vol (CSR-71%, VM-21.5%, Ash-9.3%,

S-0.50%, p-0.045%, TM-9.7%)Semi Soft Met Coke

06 January 2014 134.00 132.50 93.25 272.00

07 January 2014 133.75 132.25 93.50 272.00

08 January 2014 133.75 132.25 93.75 272.00

09 January 2014 133.75 132.20 93.75 272.00

10 January 2014 132.75 131.25 93.25 272.00

13 January 2014 131.75 130.25 92.50 272.00

14 January 2014 131.75 130.25 92.50 272.00

15 January 2014 131.75 130.25 92.00 272.00

16 January 2014 131.75 130.25 92.00 272.00

17 January 2014 131.75 130.25 92.00 272.00

20 January 2014 131.50 130.00 92.00 272.00

21 January 2014 130.50 129.00 91.50 272.00

23 January 2014 127.00 125.00 89.00 264.00

24 January 2014 127.00 125.00 87.00 264.00

28 January 2014 127.00 125.00 87.00 265.00

29 January 2014 126.50 125.00 87.50 265.00

30 January 2014 126.50 125.00 87.50 265.00

Source: Insights Research


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Flat steel producers play on low import, input costs


Flat steel product makers relied on low imports and rising input costs to raise their prices even as demand failed to

cheer them. JSW Steel, a major producer of flat steel

products, announced a price hike of `1,000-1,200 per ton effective from February, 2014. Rising input costs are posing a challenge for the flat steel major.

Industry experts are still sceptical of any major revival in domestic demand for flat products. But, lower levels of imports of flat products have given JSW elbow room to raise prices amidst a dull demand scenario the economy.

Industry sources believe that JSW Steel has booked orders till March 31, 2014. Moreover, it has been able to find a lucrative overseas market. JSW has more than doubled its exports, which has helped in better realisations.

The flat steel industry is witnessing a pricing strategy wherein increase in prices by one major player triggers other manufacturers to raise prices. Last month, the price hike

from JSW Steel was followed by SAIL and other primary manufacturers.

This month, Essar Steel is also planning to raise its prices for flat steel products by `1,000-1,200 per ton, according to Essar Steel sources.

Industry sources say SAIL too plans to raise prices of flat steel products by `750-1,200 per ton.

Some industry analysts say high procurement prices of iron ore for JSW, which does not have any captive iron ore block, has led to frequent increase in prices.

A comparison of flat steel production and iron ore procurement prices is shown below.

Meanwhile, trading sources said markets in Mumbai also remained weak. An importer based in Mumbai expressed pessimism owing to a dull demand in this region. Mumbai, which is often considered a key hub for trading in flat steel products, has not seen any revival in demand either.

A slowdown in the number of projects and lack of demand from the automobile industry are to be blamed for poor demand in this region. Demand from pre-engineering and fabrication units has not seen any improvement either.

The automobile sector, one of the major

JSW Steel flat steel production vs iron ore procurement prices


consumers of flat steel products, has not seen any significant improvement in demand. The automobile industry consumes 19 percent of total flat steel production in India.

An overview of the consumption pattern of flat steel products across different sectors is shown below.

Mixed numbers for auto sectorThe latest numbers from the auto industry

association, Society of Indian Automobile Manufacturers (SIAM), reveals that production has seen a modest growth of 2.1 percent between the period of April 2013-December 2013 when compared to the same period last year. SIAM believes that the two-wheelers segment has

seen a good growth in this period and, in fact, has c o n t r i b u t e d to the overall growth.

Passenger vehicles sales

declined 5.7 percent and commercial vehicles sales declined 18.4 percent. Medium and heavy commercial vehicles encountered a de-growth of 26.9 percent, whereas light commercial vehicles registered a decline in sales by 13.9 percent during this period. The slowdown in sales of commercial vehicles is because of lack of mining activities and stalled infrastructure projects.

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June July

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Sept

embe

r

Oct

ober

Nov

embe

r

Dece

mbe

r

Qty (in million tons)

Month wise import of flat steel products in 2013-14

Source: Insights Research

28%

19%

18%

15%

9%6% 5%

Capital goods Automobiles PipelinesConstruction Consumer durables OthersOil & Gas

Sector wise consumption of flat steel products


During the month of January, the government and private companies started their construction projects, which resulted in improvement in demand.

Few major brands based in Raipur have supplied around 2,500 tons of average quantities of beams to Chhattisgarh State Electricity Board (CSEB).

Some industry players said the rise in structure demand did not lead to a concomitant rise in prices as rates of scraps, the input material, fell in the main trading centre of Alang.

In line with the other structure brands, wire rod demand also remained stable.

Sources at RINL said the stable market led to a rise in wire rod offers by `600 per ton by the state-owned steel company. Sources

said SAIL has also raised wire rod prices by `500 per ton.

“In the beginning only pending orders were cleared but now we are receiving new orders on new rates,” said an industry player.

Semi finished demand volatile

Demand for semi-finished MS ingots and billets remained volatile in line with the end products.

However, re-bar production growth supported the volatility in demand to some extent. “Any further improvement in prices is not expected from this position as the construction sector, which is the major buyer of finished steel, is witnessing slower activities,” said an ingot buyer.

NINL keeps offers unchanged

Neelachal Ispat Nigam Limited (NINL), which has an integrated plant with a capacity of around 1.1 million tons and a steel plant at Kalinga Nagar Industrial complex, Jajpur (Odisha), kept its MS billet prices unchanged at `27,600 per ton (ex-plant).

The company is offering 9,635 tons of Concast billets of grade IS 2830 in an open sale offer on first-come-first-serve basis, according to company sources.

Long steel, semi finished demand remain volatile


Long steel product demand remained volatile with marginal ups and downs but market players were confident

that demand would remain stable in the near future with construction and infrastructure sectors being the major platforms of growth for the economy.

In case of re-bars, market demand remained stable and, according to participants, there will be no major correction in re-bar demand and it would be stable in the near term on the back of ongoing construction and infrastructure projects.

While market participants see good demand in the western, central and northern regions of the country, a re-bar manufacturer in Rourkela said, “The conversion cost of MS ingot to re-bar has increased. Stable demand has led to the clearance of stock and plants operating at full capacity. I am of the view that the market will sustain in this pace.”

In south India, demand remained good but re-bar supplies to Bangalore went down owing to a halt in construction activity due to a strike by the sand traders.

But demand will pick up as soon as there is an upswing in construction activities, said traders.

Structural demand strong

Structural demand in central and western India increased as expected by market players.

Consumption of non-alloy finished steel in April-December 2013-14(in '000 tons)

particulars Total production Imports Exports Availability Variation

in stock

Consumption Variation %2013-14 2012-13

Bars & rods 22196 254 465 21985 -226 22211 21587 2.9

Structurals 5014 33 53 4994 -22 5016 4691 6.9

Rly Materials 659 4 1 662 -19 681 694 -1.9

Total 27869 291 519 27641 -267 27908 26972 3.5

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Tata Steel has launched two new products, Tata Ferromag (branded ferro manganese) and Tata Tiscrome

(branded ferro chrome). These products were launched by Tata Steel’s Ferro Alloys & Minerals Division.

Speaking on the occasion, D B Sundara Ramam, Executive-In-Charge, Ferro Alloys & Minerals, said, “As part of our promise to deliver innovative quality products to the market, we are proud to announce the launch of Tata Ferromag & Tata

Tiscrome. These brands fulfill the long-felt market need of committed availability to customers along with product consistency and guaranteed chemistry, weight and size of alloy. Authorised distributors across the country will ensure that customers have the convenience of purchasing the product when they want it, how they want it and where they want it.”

The products will be sold in branded 50 kg & 1 million ton (mt) HDPE bags which have tear-proof labels ensuring bag-wise traceability across the value chain. Tata Steel is targeting a market size of 300,000 mt a year in India for both Tata Tiscrome and

MMTC aims to export chrome ore in Q4, eyes tie-up with MOIL


MMTC Ltd expects to sell around 40,000 tons of chrome ore in the export market after tendering in the January-March quarter (Q4) of 2013-14, a source said.

“The company has sold a total of 150,000 tons of chrome ore during the first nine months of 2013-14 and another 40,000 tons are expected to be sold in the fourth quarter,” the source added.

MMTC has set a target to achieve an export turnover of `300 crore from chrome ore in 2013-14 and is most likely to achieve the target. Besides chrome ore, MMTC is also trying for export of high carbon ferro chrome, the source added. MMTC Ltd is also planning to enter into a tie-up with South African miners for import of fixed quantities of manganese ore, a source said.

“No one gives manganese ore on long-term price basis contracts, but MMTC is trying to enter into some long-term contracts for fixed quantities,” the source added.

Meanwhile, a consignment of 5,000 tons of manganese ore from MMTC is likely to arrive at Paradip Port in March.

The company is also trying to tie up with Manganese Ore India Ltd (MOIL) for exporting the latter’s ore.

A final agreement is yet to be reached, but it is understood that MOIL has given the go- ahead to MMTC to tie up with buyers and, based on the responses of the tie-ups or number of buyers, the miner will take a call on the prices for exports. MOIL is already selling manganese ore through e-auction to domestic buyers.

Tata Steel launches 2 branded ferro alloys

Tata Ferromag. In terms of market share, Tata Steel will target 38 percent share in the domestic market with Tata Tiscrome in FY’15 while Tata Ferromag is targeted at 10% in FY’15. The two newly-launched brands will be available across distribution centres in India. Tata Steel is rolling out the product in Gujarat, Maharashtra, NCR, Rajasthan, Odisha and West Bengal, which are the major consumption centres.

Ferro chrome and ferro manganese are ferro alloys widely used as alloying agents in the production of carbon and stainless steel. Ferro chrome provides corrosion resistance thus increasing the life of stainless steel, while ferro manganese provides the necessary toughness and hardness to steel. The introduction of the two brands will ensure customers are able to reduce on the inventory holding, get guaranteed quality, leading to minimal wastage of heat and customised sizes, leading to easier handling of the material, a Tata Steel release said.

IMFA Q3 net down 27% to `10.98 cr


Indian Metals & Ferro Alloys (MFA) reported a 27 percent decline in net profit to `10.98 crore in the quarter

ended December 31, 2013. The company had reported a net profit of `15.06 crore in the same period last year.

The company said its revenues increased 17 percent to `364.06 crore in the quarter under review as compared to `311.50 crore in the same period last year.

EBIDTA (Earnings before interest, taxes, depreciation and amortisation) increased 44 percent to `87.13 crore as compared to `60.42 crore in the year-ago period.

"The quarterly performance is in line with our expectations with revenues rising 17 percent and operating profits by 44 percent which is better given the difficult circumstances. However, net profit has been impacted due to higher depreciation and finance costs on account of the recently commissioned captive power plants," Managing Director & Chief Executive Officer Subhrakant Panda said.


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Indianpellet-makers’ palette of woesTamajit Pain

The government’s recent imposition of the 5% export duty on iron ore pellets has divided the steel industry.


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The pellet industry, which had been slowly taking baby steps to bring in complete transformation of the steel-

making process in India, is in the limelight but for all the wrong reasons.

The Indian government has recently imposed a five percent tax on the export of iron ore pellets in response to demand from the domestic steel industry.

The Indian steel industry made representations to the government that a nil rate of duty on exports of iron ore pellets and a 30 percent tax on the export of iron-ore fines had led to a situation in which pellet exports were rising sharply through diversion of fines, leading to a shortage of raw material at the local steel mills.

The differential rate of duty on iron-ore fines and pellets was showing divergent trends in export of the critical raw material. Taking advantage of a nil rate of export duty, iron ore pellet shipments from the country increased 111 percent to 435,000 tons during April-October, 2013, compared to 40,000 tons during the corresponding period of the previous financial year, with the mining industry expecting that total pellet exports during 2013-14 would touch a whopping 800,000 tons or so.

During April-October, iron ore exports were estimated at 8.43 million tons, down 43.5 percent over the corresponding period of the previous year.

India has about 36 iron ore pelletisation plants operated by steel companies, as well as standalone raw material companies like KIOCL (formerly Kudremukh Iron Ore Company Limited), with a combined capacity of around 63 million tons.

The Indian government’s move came after the Associated Chamber of Commerce and Industry (ASSOCHAM), an industry representative body, wrote to Finance Minister P Chidambaram, pointing out the sharp rise in iron ore pellet exports, owing to the nil rate of tax, which had accentuated the shortage in the raw material faced by domestic steel companies at a time when several iron ore mines, in provinces such as Karnataka and Goa, continued to remain closed following investigations into illegal mining.

Decision a setbackThe decision to impose a five percent export duty on iron ore pellets is a setback for the

industry, which is known for upgrading the low grade ore into usable raw material, said pellet producers and pro-mining lobby bodies.

“It is a huge setback for the pellet industry because, as pellet producers, we have to pay excise duty and now the export duty comes as an additional burden,” said N D Rao, Managing Director of Brahmani River Pellet Ltd (BRPL), a unit of Stemcor that has a 4-million-tons-per-annum (mtpa) pellet plant in Odisha.

Taking advantage of the government’s incentives on import of pellet-making equipment and nil export duty, large capacities were added in the last two years, taking the total production capacity in the country to nearly 60 million ton from 28 million ton in 2010-11.

Till 2012-13, exports of iron ore pellets were negligible.

“However, in April-November, 2013, exports of iron ore pellets have risen sharply, causing an apprehension about shortage of iron ore in the country,” the finance ministry said in a statement.

According to trade estimates, so far, nearly one million tons of pellets have been exported, which is less than 1.5 percent of the total installed capacity. KIOCL tops the list as the lead exporter, followed by Jindal Steel & Power Ltd (JSPL). Essar Steel and BRPL also export pellets in limited quantities to South East Asian nations.

The mining lobby said the decision is skewed towards the steel-maker’s lobby. “The recent decision to impose the export duty on iron ore pellets shows that the Union government is influenced by the steel-makers’ lobby. This will hurt future investments in pelletisation capacity,” said R K Sharma, Secretary-General of the Federation of Indian Mineral Industries (FIMI).

Pellet producers said, since many large steel-makers have their own pellet plants and others do not have the facility to use domestically available blast furnace grade

pellets, it will affect the pellet manufacturers and lead to a curb on productions.

“Pellet manufacturers strongly feel the Union government is playing into the hands of a handful of steel-makers. We urge the government to reconsider its decision and exempt pellets from the export duty,” said S K Chatterjee, Secretary, Pellet Manufacturers’ Association of India (PMAI), in a statement.

Pellet-makers talk toughSome iron ore pellet producers said they may be compelled to shut operations if the government does not roll back the five percent duty imposed on exports of iron ore pellets. The shutdown would render futile nearly `35,000 crore of investments.

While recommending the duty, the steel ministry had argued that iron ore was being exported in the garb of pellets, which virtually amounted to exporting the scarce mineral.

It seems, the finance ministry imposed the duty despite objections raised by the commerce and industry ministry. In a letter dated January 7, the commerce ministry wrote to the revenue secretary, saying it does not support the export duty because pellet is a value-added product and it has been the ministry’s stance that there should be no export duty on the same.

However, the commerce ministry replied that, out of an installed capacity of over 60 mt, barely 25 mt is domestically consumed. The lack of low domestic demand has, in fact, compelled producers to cut down their capacity utilisation to less than 50 percent.

Leading pellet producers have told the finance ministry that while most plants would find it unviable to operate, bigger players may have to rethink on expanding the capacities unless the government addresses their concerns.

Firdose Vandrevala, Executive Vice-Chairman of Essar Steel, said: “The government hastily announced the five percent export duty on pellets, despite the fact that entrepreneurs have invested thousands

The demand for pellets has increased from steel mills, resulting in the material’s prices rising uninterruptedly. This is likely to continue, on increased steel production.

HORIZONTAL PUMP

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of crores of rupees to create capacities and expand their operations. This action deepens investor’s fears of a stable policy. Flip-flop policies can turn investments sour overnight.”

Malay Chatterjee, Chairman of the state-run Kudremukh Iron Ore, said his pellet project in Karnataka has a capacity of 3.5 mt and is a 100 percent export-oriented unit, which recently commenced overseas sales. For my company, the situation is even more worrisome. “My unit can only survive on exports. The duty will hugely impact commercial viability of our operations,” he added.

Ravi Uppal, CEO of JSPL Group, said: “The move exhibits lack of consistency in government policies. It is a decision without

any rationale, which would do colossal damage to the pellet industry, which has invested over `30,000 crore during the last three years.”

Industry experts said a little over one million tons of pellets have been exported till January this fiscal against the installed capacity of 60 million tons. “I fail to understand what motivated the steel ministry to recommend the duty and how much revenue would the government gain in imposing the same when exports are abysmally low,” said a pellet-maker on condition of anonymity.

However, whatever be the reason or impact of the duty on the pellet-making industry in India, it becomes imperative to examine the need for growth of the pellet-

making capacity in the country as India embarks on increasing its steel-making capacity to meet future demand.

Pelletisation: A necessityAs India progresses towards higher levels of growth and more emphasis is being put on the development of the infrastructure and manufacturing sectors, the iron and steel industry is poised to see a rapid change in the years to come. The demand for steel, which had seen a slowdown in recent times to 4-5 percent owing to the economic slowdown, is expected to grow 8-10 percent once the economic cycle rebounds and the government tries to push forward with its stalled projects. The domestic steel production capacity is expected to grow from the present level of 96 million tons to 150 million tons by 2016-17. Alternative iron-making processes for steel production may change the pattern of use of material inputs and cause a significant shift in the share of lumps and agglomerated ore, ie, sinter and pellets. As fines constitute around 50 percent of total iron ore produced, pelletisation is the need of the hour.

Iron ore – the basic raw materialIron ore forms the basic raw material for the iron and steel industry. India has large reserves of good quality iron ore which can meet the growing demands of the domestic iron and steel industry and can also sustain considerable external trade.

The United States Geological Survey (USGS) has estimated that world resources are estimated to exceed 800 billion tons of crude ore containing more than 230 billion tons of iron. India possesses haematite resources of 11,426 million tons of which 6,025 million tons are reserves and 5,401 million tons are remaining resources. About 2,823 million tons (25 percent) are medium grade lumpy ore resources while 915 million tons (eight percent) are high grade lumpy ore. Out of the fines resources, about 2,507 million tons (22 percent) are medium grade ore, 39 million tons (one percent) are high grade ore and 17 million tons (one percent) resources are of blue dust variety. The remaining are low grade, unclassified resources of lumps and fines or high, medium, low or unclassified grades of lumps and fines mixed etc.

Major resources of haematite iron ore are located in Odisha (3,789 million tons or 33 percent), Jharkhand (3,044 million tons or 27

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Five iron ore zones with respect to occurrences

♦ Zone A: Odisha and Jharkhand ♦ Zone B: Chhattisgarh and Maharashtra ♦ Zone C: Karnataka ♦ Zone D: Goa and Redi ♦ Zone E: Kudremukh, Bababudhan and

Kudachadri in Karnataka


percent), Chhattisgarh (2,120 million tons or 19 percent), Karnataka (1,148 million tons or 10 percent) and Goa (642 million tons or 16 percent). The balance four percent resources are spread in Maharashtra, Andhra Pradesh and Madhya Pradesh.

With domestic steel production capacity expected to touch 150 million tons by 2016-17, there is a need for adequate steel-making and agglomeration capacity.

Pelletisation importantLong-term forecasts reveal that the Indian steel industry can be comfortable with the supplies of domestic iron ore. The life of high grade lumpy ore would be 10 years. About 60 percent of the production comes in the form of fines (including concentrates) during the course of mining operations. Further, 10-12 percent lumps become fines while handling, loading/unloading and while converting them into calibrated lump ore (CLO) for sponge or pig iron plants or exports.

On an average, 2.5 tons of run-of-mines (ROM) are required to get one ton of CLO.

Lumps and fines ratios in Indian ore deposits are almost 50:50 but only 12.3 percent of these reserves belong to the high grade category while 48 percent comprise

medium grade, 26 percent low grade and the rest belongs to unclassified categories.

Iron ore in sizes ranging from less than 8 mm to 0.15 mm are designated as fines, whereas, the ore below 0.15 mm is known as slime which is generated in the washing plant.

Unless fines find an outlet directly or through conversion into sinters/pellets, these will go on accumulating at mine sites. This will create the following economic, social and environmental problems:

y Affect mining operations because fines will occupy space.

y Affect agricultural fields, water bodies and other areas during the rainy season when they get washed out.

y Increase the percentage of ambient and suspended particles.

y Fines accumulation will affect the production of lumps. Unless they find an outlet, no further production of lumps can take place. If the fines are not utilised, the entire cost of production will be loaded on lumps which will make steel more costly and mines unviable.

The fines may be utilised either through sintering or pelletisation. The process of beneficiation and pelletisation of low grade iron ore and slime will play a critical role in conserving good quality iron ore reserves. Low grade iron ore, iron ore fines and iron ore tailing/slime accumulated over the years at mine heads and generated during the existing washing process, need to be beneficiated to provide concentrates of requisite quality to the Indian steel plants.

These concentrates are too fine in size to be used directly in the existing iron-making process. For utilising this fine concentrate, pelletisation is the only alternative available.

Advantage pellet Iron ore pellets have been used for long in blast furnaces in many countries where lump iron ore is not available. The excessive fines generated from iron ore mining and the crushing units for sizing the feed for blast furnace and sponge iron plants are mostly unutilised.

Good reducibilityBecause of the high porosity (25-30 percent), pellets are usually reduced considerably faster

than hard burden sinter or hard natural ores/lump ores.

The uniform chemical composition and loss on ignition makes them cost-effective.

Good bed permeabilityThe spherical shape and open pores give pellets good bed permeability.

Less heat consumption than sinteringApproximately 35-40 percent less heat is required than sintering.

PreparationFor the feed preparation, a proper proportion of iron ore powder and bentonite is put in the horizontal mixer. The green ball production takes place by adding proper amount of water to the feed during balling in the disc pelletiser. The size of pellets after balling should be in the range of 8-20 mm. The undersize and oversize pellets are sent back to the mixer. Drying and pre-heating of pellets takes place in grate kiln with the help of fuel coming from the rotary kiln. Heating of already pre-heated pellets takes place in rotary kiln through burners where combustion of pulverised coal takes place to generate working temperature of 1,200-12,500 °C. The pellets become hard and strong after heating.

Cooling of hardened pellets takes place with the help of the annular cooler where cooling is carried out with blasts of cold air. The cooled product is stocked in open yards for despatch. The system has adequate de-dusting and heat recovery provisions.

Energy savingIt is reported in various studies on the existing pellet-based units that pellets reduce coke consumption by more than 50 kg per ton in blast furnaces operating with 100 percent pellets. The pellets are energy-saving and environment-friendly raw materials vis-a-vis iron ore.

Mining waste can be better utilisedAs reported by various sources, the low iron content of ores and fines remain unutilised at various mines which ultimately lead to deposition of iron ore wastes at mining site. With conversion of iron ore fines and lumps into pellets, the mining waste can be better utilised. It also fetches good price in the market.

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Pellet pointers ♦ Five states – Jharkhand,

Chhattisgarh, Karnataka, Goa and Odisha – contribute 96 percent of the total production.

♦ 65 percent of total iron production is accounted from the four districts, namely, Keonjhar (Odisha), Bellary (Karnataka), Singhbhum (Jharkhand) and Dantewada (Chhattisgarh).

♦ Public and private sectors contribute 27 percent and 73 percent of iron ore respectively.

♦ The overall percentage of lumps usage in steel-making is around 47 percent which is quite high in comparison to other countries. Ours is the only country where over 30 percent of steel comes from induction furnaces using sponge iron.


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Low level of impuritiesThe iron and steel units using iron ore as raw material face problems due to high level of impurities in iron ore. Pelletisation is one of the best options to reduce impurity levels in iron ore. There is demand among steel manufacturing units for high quality raw material like pellets to compete in the steel export market.

Status of pellet plants in IndiaThe use of pellets in blast furnaces is very limited in India. Pellets bear only 30 percent of the blast furnace burden at JSW whereas sinter comprises 70 percent. However, in COREX and gas-based DRI units, pellets constitute 70-80 percent of the burden.

Pellet making capacityIndia has come a long way from the 2007 levels of 18.3 million tons to the current level of over half a century. India is targeting pellet

capacity of 75 mt by 2015. This includes capacities of Essar, Tata Steel, BRPL, Shyam Siel, Bhushan, Abhijeet Group, JSW Steel and MSP, according to industry experts.

However, analysts said, most of the pellet plants are coming up without any beneficiation capacity. Only Essar has a 12-mtpa beneficiation plant in Dabuna - within close proximity of major mining sites. This will help the project use low grade iron ore fines that are unused and not easily consumable and keep the environmental impact to a minimum with the use of slurry pipeline.

SAIL, Tata Steel and OMC have also planned their mines operation with cut-off at 56 percent Fe content. According to rough estimates, around 200 mt of low grade iron ore is lying in dumps and cannot be utilised because of lack of beneficiation technologies. Therefore, experts feel, along with pellet capacity, the country needs beneficiation capacity to properly use iron ore.

According to industry experts, steel mills’ dependence on pellets as a raw material is set to increase manifold in the next two-three years, due to shortage of high-grade iron ore in India.

About 70 percent of India’s steel production capacity would depend upon pellets as the only source of raw material in the next two years. Currently, 55 percent of steel is produced through pellets in the country.

In terms of crude steel production, all captive mills are now setting up their pellet plants and their utilisation ratio for pellets is close to 70 percent on an average. Essar and JSW have nearly 100 percent utilisation capacity of iron ore fines after being converted into pellets. Steel Authority of India Ltd (SAIL), Tata Steel and Rashtriya Ispat Nigam Ltd are at 75-80 percent. SAIL and RINL would, in due course, get their own pellet plants. So would NMDC, for the same reason.

The importance of pellets has also

Company Name District State 2007 2008 2009 2010 2011 2012 2013 2014 2015

Adhunik Metaliks Jamshedpur Jharkhand - - - - - 1.2 1.2 1.2 1.2

Arya Iron and steel Barbil Orissa - - 1.2 1.2 1.2 1.2 1.2 2.4 2.4

Ardent steel (subsidiary of GPIL, Hira Group)

Keojhar Orissa - - - 0.6 0.6 0.6 0.6 0.6 0.6

Bhusan power and steel Jharsguda Orissa - - - - - - - 4.5 4.5

BMM Ispat Hospet Karnataka - 1.2 1.2 1.2 2.4 2.4 2.4 2.4 2.4

Brahmani River Pellets Ltd. (Stemcor)

Jajpur Orissa - - - - 4.0 4.0 4.0 4.0 4.0

EssarParadip Orissa - - - - 6.0 12.0 12.0 12.0 12.0

Visakhapatnam Andra Pradesh 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0

Euro bond industries Jabalpur Madhya Pradesh - - - - 0.5 0.5 0.5 0.5 0.5

Godawari Power and Ispat Ltd. (Hira group)

Raipur Chhattisgarh - - 0.6 0.6 0.6 0.6 0.6 0.6 0.6

JSPL Barbil Orissa - - - 5.0 5.0 5.0 5.0 5.0 5.0

JSW SteelBellary Karnataka

5.0 5.0 5.0 5.0 - 9.0 9.0 9.0 9.0

KIOCL 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5

Mandovi Goa Goa 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8

Monnet Ispat Raigarh Chhattisgarh - - - - - - 1.2 1.2 1.2

MSP SteelJharsguda Orissa - - - 0.6 0.6 1.2 1.2 1.2 1.2

Raigarh Chhattisgarh - - - 0.3 0.9 0.9 0.9 0.9 0.9

MSPL Koppal Karnataka - - - - 1.2 1.2 1.2 1.2 1.2

NMDCDantewada Chhattisgarh - - - - - - - - 2.0

Bellary Karnataka - - - - - - - - 1.2

Sarda Energy Raipur Chhattisgarh - - 0.6 0.6 0.6 0.6 0.6 0.6 0.6

SAIL Gua Jharkhand - - - - - - - - 4.0

Shri Bajrang power & Ispat Raipur Chhattisgarh - - - - - 1.2 1.2 1.2 1.2

Tata Steel Jamshedpur Jharkhand - - - - - 6.0 6.0 6.0 6.0

Total India 18.3 19.5 21.9 28.4 36.9 60.9 62.1 67.8 75.0

Source: Ministry of Mines and Insights Research


increased manifold because of lack of lumps (high grade of iron ore, with over 63 percent of iron content) since the Supreme Court suspended excavation of iron ore in Karnataka, followed by investigations on existing mines in Goa and Odisha, as say market insiders.

Consequently, independent steel mills that were using only high-grade lumps for manufacturing steel have reduced their capacity utilisation. Independent mills do not have integrated iron ore mines’ support and, hence, depend on the open market for raw material procurement. Large steel mills, in contrast, enjoy the backing of ore mines and did not face a supply squeeze.

In the absence of mining activities, the availability of lumps remains an issue. Due to the government’s sudden increase in the export duty to 30 percent and with rail freight charges almost 10 times higher for exports compared to local charges, shipment has become unviable.

Consequently, low grade iron ore continues to be available to the tune of around 150 million tons, since this quantum had been produced and stocked before suspension of mining in various states, sources said.

To utilise this stockpile, steel mills are expanding through backward integration, by setting up pellet plants to convert the ore into pellets with around 95 percent of iron content.

Meanwhile, the demand for pellets has increased from steel mills, resulting in the material’s prices rising uninterruptedly. This is likely to continue, on increased steel production.

India’s crude steel production is estimated to increase to 95 mt by 2015. This indicates close to 100 mt of iron ore would be required for active production, taking into account utilisation capacity at 60 percent and direct crude steel production from fines and lumps at 70 percent. The dependence of the direct steel sector on pellets has also been increasing, following a majority of captive steel plants setting up their own pelletising facilities.

Also, the mills’ dependence on sponge iron has increased from less than 20 percent in 2010 to more than 45 percent in 2012. Analysts forecast their dependence on sponge iron to rise to over 65 percent in the next two years.

Suitable technology at smaller scaleThere are certain technologies which can actually help in reducing the cost of

pelletisation. In fact, new technologies have come up with smaller sized pellet plants in China to be adopted for Indian conditions. For projects above 2 million tons per year capacity, proven technology for hematite ore pelletisation is readily available from the West and a few plants are already successfully operating in India.

For smaller plants, many Indian entrepreneurs have been looking at Chinese suppliers and evaluating various technologies available in China, where hundreds of similar plants are operating, however, under very different circumstances. Further analysis of the same here will explain the challenges posed for these smaller projects in the Indian context and the solutions to address the same.

Technology selection for pelletisationThere are several technologies and systems available for iron ore pelletisation. The selection of the right technology can make a lot of difference in every respect. To quote few are:

y Vertical shaft kilns for capacity ranging from 33,000 – 600,000 tons per annum (tpa).

y Vertical shaft kilns inclined and circular cross-section for capacity of 200,000-700,000 tpa.

y Travel grate, rotary kiln and circular cooler for capacity of 200,000 – 5,000,000 tpa.

y Integrated pellet + DRI plant for capacity of 60,000 – 270,000 tpa.

y Steel belt sintering technology for capacity of 80,000 – 2 mtpa.

y Long straight moving grate for capacity - preferred for 2 mtpa and above.

y Batch processing kilns for very small capacity.

Now improved process technique is available where the heat requirement is as low as 120 – 130 K Cal. /Kg. It is also possible to make an integrated pellet and DRI plant where the project cost and energy consumption is reduced drastically.

The future of sintering and pelletising is directly related to the future of the iron-making processes that use sinter and pellets, mainly the blast furnace and DR process. The future of these processes in turn depends upon steel production and consumption, which have been on an upward trend.

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The decision to impose a five percent export duty on iron ore pellets is a setback for the industry, which is known for upgrading the low grade ore into usable raw material, said pellet producers and pro-mining lobby bodies.


Our situation is quite different from that of the Chinese pelletisation industry and the Chinese technology and design institutes are still in the process of establishing the knowhow for pelletising hematite ore.

In China, the feed material to almost all plants is magnetite ore concentrate fines available from mining companies. Pelletisation of magnetite ore is easier for various reasons. Also, almost all the Chinese pellet plants are located in the blast furnace area, and they use blast furnace gas as the main fuel.

However, the demand and supply pulls have changed the scenario of availability of quality ore fines. Three to four years back, fines of above 63% Fe grade were considered as typical feed material for pellet plants. Today, however, more and more pellets plants are using beneficiated fines as feed material.

Techno-economic issuesThe country’s iron ore requirement is going to increase substantially (almost 340 million tons per year by 2020) in line with domestic steel production requirements outlined in the National Steel Policy.

The percentage of fines to lumps is generally rising as mining goes deeper. Limited reserves of high grade iron ore pose a great challenge to the long-term sustainability of the Indian iron and steel industry. In order to ensure optimum use of existing iron ore resources with special emphasis on conservation of high grade ores, there is a pressing need to utilise existing low grade iron ores, including slimes and dump fines which are stockpiled in millions of tons in different mine heads. The solution lies in beneficiation which will not only help in utilisation of hitherto wasted low grade ores/slimes by upgrading its Fe value, but also mitigate environmental hazards arising out of large stockpiling of slimes/rejects.

Newer and modern beneficiation techniques are required for up-gradation of low grade iron ores with high yield. Because of varying mineralogical characteristics of ore bodies, specific beneficiation technology solutions need to be developed by R&D organisations for recovery of micro-fines for each of the deposits through extensive test work and development of flow sheet.

Globally, pellets are extensively used in BFs, particularly in the US and Canada.

In India, pellets are seen as a technical requirement in certain processes and so pellet prices remain high and quantity is limited.

To encourage mine owners to set up pellet plants, industry has been suggesting that the government must give incentives like depreciation, income-tax benefits, lower royalty rates, etc. Recently, Industry bodies have requested removal of the export duty on pellets as a value-added product.

Clearly, success in adoption of pellets depends on its pricing relative to lumps. This issue really needs urgent and concentrated joint attention of the ministries of commerce, mines and steel. Perhaps an integrated view needs to be taken in relation to the export regime presently available for high grade fines.

Given the reality of our sponge iron industry, any strategy will have to centrally address the issue of efficiently replacing the use of lumps by pellets in respect of the DRI units and larger effort to move towards more efficient steel-making technologies.

Since good iron ore deposits are depleting fast, beneficiation technologies will have to be adopted to meet iron ore demand. Agglomeration technologies such as pelletisation and sintering will have to be added to Indian steel plants so that concentrates and agglomerated products can be used in iron-making to produce iron and steel economically and in an eco-friendly way.

Conclusion

There is a need for taking up fresh exploratory investigations by the Geological Survey of India (GSI) and the Indian Bureau of Mines (IBM) to ascertain proved reserves as per the International Convention.

Further, the present classification of ore reserves need to be modified by reclassifying the reserves into four grades, viz, high grade (Fe +62%), low grade (Fe +52%), poor ores (Fe +45%) and very poor ores (Fe below 45%) and for each grade, proved reserves need to be separately estimated.

The government needs to provide encouragement by way of policy support, incentives, so as to facilitate entrepreneurial initiative towards up-gradation of low grade iron ores, including slimes, in tailing ponds by beneficiation and subsequent utilisation.

Beneficiation of low grade ores, mostly at micro-fines level, provides concentrates which can be used in iron-making in the form of pellets. Therefore, pelletisation technology will have a predominant role in supplying the prepared burden for iron-making. Adoption of suitable pelletisation technologies of varying capacity is encouraged to meet specific needs with respect to availability and type of iron ore fines/concentrates in the country.

Major efforts are under way to develop new cost-effective hot metal/steel production technologies based on utilisation of iron ore fines/slimes and non-coking coal (because of limited global reserves of coking coal). These include the Hismelt, Finnex and Romelt technologies.

There is a need to encourage adoption of some of these technologies, taking into account Indian raw materials. This will not only lead to a maximum utilisation of fines but will also conserve our natural resources.

Prospective entrepreneurs are apprehensive about the continuous availability of iron ore fines from same sources on a long-term basis because of sensitivity of the beneficiation technology to different iron ores. Therefore, there is a need to develop some mechanism to provide iron ore linkages to them.

In view of increasing demand of high quality iron ore and for environmental protection against dumped fines and slimes in the tailing pond, an improved beneficiation technique for iron ores, dumped fines and slimes, use of blue dust, through sintering and pelletising need to be encouraged.

While allocating/renewing iron ore mines, preference should be given to those who undertake production of pellets/sinters.

Incentivising beneficiation and value-addition is a necessity, particularly in the case of notified areas with known mineralisation.

Steel plants with larger capacities should be promoted which can make capital investments for agglomeration. These units can also use the waste energy efficiently. The government should facilitate and encourage pipeline transportation of fines/slimes.

Lastly, the government should ensure a level playing field for investors so that they do not get discouraged from investing in pelletisation and beneficiation projects.

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With the new plant, ArcelorMittal Bremen, producer of high-strength steel grades, will be able to boost its production as a result of shorter throughput times in the areas of sampling and packaging and process shipping orders “just in time“. Commissioning is scheduled for the autumn of 2014.

The new line will be the first to incorporate several new developments by SMS Logistiksysteme. The key component will be the high-performance sampling shear for high-strength and ultra-high-strength steel grades. It is able to cut strip thicknesses of 1.5 to 28.3 millimetres.

The strapping machine for high-strength steel strip commenced operation in the hot-strip despatch area at ArcelorMittal Bremen as early as in April 2013. Now, strapping by two to three bands replaces the common practice of wrapping up to 20 circumferential bands around each coil and of manually welding together the outer coil windings to prevent the high-strength steel strip coils from springing open.

The processing stations will be designed for parallel operation and connected by an

end-to-end transport system. The coils will rest on asymmetric cradles with a wide support span. These cradles have been specifically developed for high-strength steel grades, to ensure safe handling during transport and processing.

The integrated line concept developed by SMS Logistiksysteme allows steel-makers to take samples of and strap their whole product portfolio from standard to ultra-high-strength steel grades in a single facility. This concept may also be adapted to hot operation with coil temperatures of up to 800 degrees Celsius in order to connect the facility directly to the hot rolling mill and process the coils in the transport line fully automatically.

RSP doubles production capacity with slab caster from SMS Siemag


In 2013, Rourkela Steel Plant (RSP) of Steel Authority of India Limited in Odisha successfully cast the first slabs on

the X-Cast® continuous caster supplied by SMS Siemag.

RSP mainly processes sophisticated micro-alloyed steels and heavy-plate grades on the caster. By means of the third slab caster in steelworks No. 2, RSP has doubled its slab production capacity to three million tons per year, thus strengthening its market position.

The single-strand caster, designed as a vertical bending plant, is intended for slabs of 220, 250 and 300 millimetres thickness in widths, ranging from 1,200 to 2,500 millimetres, SMS Siemag said in a statement.

SMS Siemag supplied the basic and detail engineering, all mechanical components, the complete X-Pact® electrical and automation systems, including the control systems (level 1) and process models (level 2).

The caster equipment includes several Intelligent Slab Casting (ISC®) modules which determine quality and production. Among these are the hydraulically actuated resonance oscillation system, remote-controlled narrow mold faces for width change during casting and the position-controlled CYBERLINK segments for performing Dynamic Soft Reduction.

In combination with the width-dependent air-mist secondary cooling and the Dynamic Solidification Control process model, these guarantee that slabs of high internal quality are produced.

Rourkela Steel Plant has already two single-strand slab casters from SMS Siemag in operation and will soon commission a converter shop supplied by SMS Siemag.

SMS Siemag AG is a company of the

SMS Group which, under the roof of the SMS Holding GmbH, consists of a group of global players in machinery and plant construction in steel and non-ferrous metals processing. Its workforce of more than 13,500 employees generate sales worldwide totalling EUR 3.3 billion.

ArcelorMittal Bremen places order with SMS Logistiksysteme ArcelorMittal Bremen has placed an order with SMS Logistiksysteme, both in Germany, for the supply of a fully automated sampling station for X-grade line pipe steels, including a connected packaging line.

TECHnOLOGy


the customer’s personnel. The scope of delivery also included the complete process equipment. This includes essential parts of the casting platform, the mold and oscillator, the strand-guiding system and discharge facilities in addition to the torch-cutting machine, deburrer, marker, roll-gap checker and pusher/piler. The project also includes electrics, hardware and software for level 1 automation and level 2 process optimisation as well as hydraulic, lubrication and cooling systems, Siemens said in a statement.

A wide range of technological packages and special equipment items have been installed in the caster to ensure high machine performance, operational flexibility and product quality. Beginning with the machine head, the LevCon system provides automatic and precise mold-level control. Mold expert serves the purpose of early break-out protection. The so-called Smart in combination with DynaWidth technology, enables the narrow sides of the mold to be hydraulically moved which allows slab width adjustments to be carried out during casting. On-line adjustment of the mold-oscillation parameters for improved strand-surface quality is made possible with the DynaFlex oscillator.

I-Star rollers installed throughout the strand-guiding system provide strand-shell support for minimised strand bulging. An integrated quality management system further contributes to the consistent production of high-quality slabs. Dynacs, a level 2 secondary cooling model, calculates the strand temperature profile and the required cooling water quantities for any position along the strand.

High internal strand quality will be assured with the installation of Smart Segments and the application of DynaGap Soft Reduction in the horizontal zone of the caster. On the basis of the Dynacs-calculated point of final strand solidification, the roller-gap settings will be automatically controlled to minimise centreline segregation.

Jindal Steel and Power Limited, part of the Jindal Group, is one of the largest steel manufacturing companies in India. The company has an installed capacity of more than six million tons of steel per year. Products comprise billets, blooms, rounds, plates, coils and rails.

Siemens continuous caster starts operation at JSPL


At the Angul plant of Indian steel producer Jindal Steel & Power Ltd (JSPL), a single-strand continuous

casting machine from Siemens Metals Technologies commenced operation in August.

The caster has a designed annual capacity of 1.5 million tons of slabs. It produces a broad range of grades that extends from ultra-low-carbon (ULC) to high-carbon (HC) steels and also encompasses micro-alloyed and low-alloy steel grades. One focus is on production of primary material for sheet metal and tube grades on a wide strip mill, also supplied by Siemens.

The continuous caster is part of an integrated steelworks in Angul in Odisha and is to produce around six million tons of steel per annum. The caster is equipped with

a straight mold and has a machine radius of 10 meters. Slabs will be cast at thicknesses of 200, 260 and 300 millimetres and in widths of 1,000-2,300 millimetres. Cut-slab lengths will range from 4.5-12 meters.

Siemens was responsible for the design of the overall plant and its mechanical equipment, for monitoring installation and commissioning and also for training

y Annual production capacity is 1.5 million metric tons of slabs.

y Continuous caster produces primary material for wide strip mill supplied by Siemens.

y Production focuses on sheet metal and tube grades.

TECHnOLOGy

41Steel Insights, January 2014

InTERvIEW

Y Srinivas Reddy is the Founder and Managing Director of Bevcon Wayors Pvt Ltd. Reddy

is a first-generation entrepreneur who started the business at the young age of 25 in 1990, armed with a conviction that “people and processes” make the difference to any organisation’s growth. Under his leadership, Bevcon has achieved rapid growth and delivered engineering solutions to around 2,400 customers globally. His fervour for design engineering has led to numerous innovations, which, while ensuring high quality and faster turnaround time, also helped the topline to grow. The company achieved a turnover of `185 crore in the last financial year. Reddy is an associate Member of the American Management Association and a Professional Member of Net Impact, a social entrepreneurship organisation. He is also the president of the Uppal Industrial Association and Chairman of Uppal IALA. He has contributed immensely towards social causes as Founder & Managing Director of IBeam Foundation, a social entrepreneurship not-for-profit organization. However, execution of turnkey projects is a big challenge in India, he tells Steel Insights.

‘Our focus is innovative conveying systems for mining applications’


‘Please give us a brief idea of the bulk material handling and processing solutions provided by your company, including special conveyors.Bevcon Wayors provides concept-to-commissioning solutions and executes turnkey projects for all bulk material handling applications. We have a dynamic team of over 300 employees and have established ourselves as a premium brand in this space in the medium enterprise segment. At Bevcon Wayors, we believe that people and processes are engines of growth. We have incorporated best HR practices and our average age group of employees is 34 years.

We are involved in virtually every facet of bulk material handling and processing solutions. Bevcon Wayors can be credited with developing material handling equipment through an in-house engineering research division and foreign technological collaborations with top engineering companies located in the US, Europe, Australia and Asia. We are the only company in India to offer various kinds of crushers, screens, feeders and sizers with in-house manufacturing facilities. We offer a range of standardised equipment as well as those for specific applications.

The company offers vibro feeders, crushers, screens, conveyors, dust collectors,

pneumatics conveying, apart from conventional material handling equipment. Bevcon Wayors specialises in new-generation, special/innovative conveying systems and material handling equipment, which include:

♦ The 90 degree steep-angle cleated belt conveyors;

♦ Air-supported belt conveyors; ♦ Sandwich-type high-angle belt

conveyors; ♦ Cost-effective pollution-free pneumatic

conveying systems; ♦ Special flip flow screens for high

moisture material screening applications; ♦ Highly efficient sugar graders; ♦ Fines screening and crushing equipment; ♦ Stockyard equipment like radial and

liner stackers and reclaimers etc followed with radial; and

♦ Linear space frame steel structure storage sheds.

Besides manufacturing, Bevcon’s key strength has been its world-class research and development division that offers cutting-edge solutions and designs of long-term value with lowest product life-cycle costs in the industry. Bevcon believes in innovation. We have an in-house

engineering research department called TDG, which develops 8-10 new material handling products every year. In fact, this department is the lifeline of our growth and helps to keep us competitive in the market.

What is the demand scenario like for bulk material handling systems in India? What is the size and growth rate of this market?The current material handling market in India is uncertain and not able to define clear strategies for meeting challenges.

At this juncture, when market conditions are turbulent, I would rather dwell on opportunities than the market size. According to recent media reports, `10-12 lakh crore worth of projects are awaiting clearances at various stages and most of these are infrastructure development projects involving cement, steel, power, ports etc. As per the 12th Five-Year Plan of 2012-17, investments in infrastructure will be nearly 10 percent of the GDP. If this planned investment does happen, it will propel the Indian economy’s growth to a higher trajectory which can lead to more business opportunities. The material handling sector is a key contributor to infrastructure growth.

Once the current hurdles are overcome, the power sector will grow rapidly as there is currently a lot of gap in demand and supply. Similarly, roads and ports too will see better growth prospects in the coming years.

What sort of technological upgradation is required in this field? Does the company have any plans to partner overseas firms for tech transfer deals in future?Technological upgradation is mandatory to survive in the present competitive world. We feel innovation is the future. Hence, we developed a two-level strategy to enhance the technology of a product profile.

♦ First is self-reliance, which is linked to innovation. We have an in-house engineering research department which develops 8-10 new material handling products every year.

♦ The second is collaborations with foreign companies for exchange of technology. We have tied up with Fleximat from Austria for critical screening applications, Germany’s Fredriech for unbalanced motors and exciters for our sizers and feeders,

InTERvIEW

Cleated Belt Conveyor – Asia's larget, 2 × 500 TPH Haldia coke handling system at TATA Steel, Jamshedpur


Rollier from Spain for fine screening applications, Poland-based FMK for stock yard-applications, Dos Santos Intl for sandwich high-angle belt conveyors, Nanjing from China for high temperature, high capacity and long distance pneumatic conveying system and China’s Bafang for circular/linear space frame steel structure storage sheds.

Which sectors do you cater to with your turnkey solutions? Are you looking at newer areas?Bevcon Wayors specialises in offering engineering-to-execution (E2E) solutions for various bulk material handling needs. Apart from standard conventional material handling equipment, the company also specialises in equipment which cater to the present-day demands of the Indian bulk material handling industry. We have executed more than 2,700 projects in the last two decades, covering almost all sectors where material handling finds applications. Equipment manufactured include raw material handling systems for steel and cement plants, fuel-handling systems for coal and biomass-based power plants, in-plant material handling systems for ferro alloy plants, sugar, fertiliser, agri, lime coke handling systems etc. We also offer unique solutions for areas with space constraints through steep angle conveyors as well as sandwich belt conveyors which are capable of conveying bulk material at a vertical of 90 degrees. We offer stockyard equipment like stackers and reclaimers along with storage sheds.

We are now concentrating on introducing new and innovative conveying systems for mining applications. These are:

♦ The high-angle sandwich belt conveyors for open pit mines and in-pit crushing, This is a breakthrough concept in conveying any mineral from the pit bottom to the surface by totally eliminating use of conventional trucks. It also minimises environmental degradation and brings down operational costs drastically and enhances productivity and product quality. These high-angle conveyors are not new, but have not found wide use in IPCC systems where players can reap advantages.

♦ Overland/cross-country and pipe conveyors for power and mining industries. Moving large quantities of material over long distances reliably is an everyday necessity and

requires a special type of conveyor which can run continuously for years. Bevcon, in technical collaboration with Dos Santos Intl, USA, is developing such systems. Using belt conveyors to bring ore, coal and other materials from the mines to processing or power plants has been proven to be an efficient method of transportation. These conveyors can cut across most terrains and have little or no impact on the environment. Operating and maintenance costs are low and they are extremely safe to operate.

What sort of a future is likely to unfold for the Indian mining sector, say over the next five years? What will be your contribution to the Indian steel sector in this period?The mining sector in India is currently rather unpredictable. The reason being that nearly 10 lakh crores worth of projects are stalled for want of governmental clearances. Unless there is clarity on these projects, we cannot make forecasts.

However, the Indian mining sector has a bright future as there is a huge demand-supply gap. There are opportunities to explore. India has vast natural resources. What we need is systematic explorations balanced with clear policies, industrial development and environmental protection that can catapult the country to greater heights in the next five years.

Bevcon has had the opportunity to be associated with prestigious infrastructure projects. These include:

♦ The solid fuel-handling system for Bharat Oman Refinery Limited (BORL) through BHEL;

♦ Asia’s largest steep angle conveyors for feeding of 100cum/hr capacity pet coke for blast furnace at Tata Steel’s Jamshedpur plant;

♦ First-of-its-kind 500tph metal recovery and slag processing plant for Jindal through Harsco;

♦ Jindal’s coal-gas-based, first-of-its-kind DRI plant in Angul for raw material handling systems;

♦ The 880 tons per hour (tph) radial coal stacker for 70,000 tons stockpile capacity with track hopper system for BOBRN wagons unloading systems at IMFA.

♦ The raw material handling system for MGM Steels, Prakash Industries, Gerdau Steel, Kamineni Steel, Monnet Ispat, Vadvedt Technologies, Bhutan, SKS Ispat, Bhilai Steel, Action Ispat, Sri Virangana Steel and many more.

We have drawn up a clear strategy for the next five years of meeting challenges that will come from the high-capacity conveying space. We have joined hands with FMK Poland for manufacturing stockyard equipment, stackers and reclaimers. We offer, through technical collaboration with Atlanta-based Dos Santos, long-distance

InTERvIEW

Overland and cross country conveyors


Bevcon Wayors has three state-of-the-art manufacturing set-ups in Hyderabad equipped with the latest technology where the entire process, from raw material to finished product, takes place under a single roof supported by the latest plasma cutting machine which is ISO certified along with streamlined back-end processes through SAP integration, in-house development of IT services and software for project planning, design, execution and monitoring.

We recently set up a full-fledged manufacturing plant in Raipur, Chhattisgarh. Our third state-of-the art fully atomised idler and pulley manufacturing plant will start running by the second quarter of the next financial year, in Hyderabad. We have plans to expand our manufacturing base by putting up a fifth unit in Hyderabad for making stackers and reclaimers, sandwich conveyors as well as material handling components.

Do you have any plan to tap the overseas markets in future? If yes, then which countries are you targeting?Being in the material handling business, our prime aim is to align to market dynamics. Currently, we are focusing on expanding our business further in the mining sector which, we feel, will grow rapidly in the future.

With regard to global plans, we supply equipment directly and indirectly to Indian customers and execute large projects abroad (South-East Asia, Middle East and Africa) for prestigious names like TATA Steel, Delmonte, Metso Papers, Phoenix Co, Euroasiatic Machinery, Malabon Soap and Oil Industrial Co, Vadvedt, LAMSAN, Bataan Power, Yemen Co for Sugar Refinery, Druk Ferro Alloy Ltd, AK Oils and Fats (U) Ltd, Ajman Perfumes etc.

What are the major challenges for the bulk material handling industry in India?Execution of turnkey projects is really a challenging game in India. Organisations should have the ability to handle business both technologically and commercially and should be self-sufficient in infrastructure, talent and project management capabilities to make it successful. Overall timely completion of projects is a big task.

Added to that is the non-clarity in

Corporate social responsibility (CSR)As a corporate, we are aware of our social responsibilities. We feel grateful towards society and intend to give back to it. As an engineering company, our aim is to usher in all-inclusive growth. Time and again, we have taken initiatives to support education for the poor and specially-abled children, making knowledge available to the visually challenged. We also hold health camps to provide free medicine to children and to make safe drinking water available to all. Our CSR activities are carried out under an initiative called “i2i – Imagination 2 Impact, a Bevcon CSR Initiative”.

Initiative undertaken locationYear of

commencementImpact

Sponsorship of specially- abled students to enable them lead proper social life.

Deaf Enabled Foundation, Hyderabad

2012 - 13The fund is being used for infrastructure development like a training centre for annual social and cultural events.

Health for Education, (medical checkup and care of orphaned children)

Shreddha Foundation, Uppal, Hyderabad

2013

Bevcon is sponsoring the healthcare of 25 orphaned children at Shreddha Foundation. Free medical camps with diagnostic tests were conducted twice in the year and free medicines were distributed as per doctor’s prescription. The health of the children has improved considerably, enabling them to attend school regularly.

Technology skills development. Donated computer

Shreddha Foundation, Uppal, Hyderabad

2013

A computer was donated to the children and training is being provided to them on MS OfficesoftwarelikeExcel,Word,PowerPointwhich will be useful for them in doing their school projects and in future as well.

Food for Education, (sponsorship of mid-day meal programme)

M/s. Akshya Patra Foundation, Hyderabad

2013

Through Akshay Patra Foundation adopted a government school with about 65 children to encourage them to continue their education with the motto of “No child should be deprived of education because of hunger”. This is helping improve attendance in the school and also the health of the students.

and high-capacity conveyors and sandwich conveyors which play a major role in mining, steel and power.

When did the company start operations in India? What is your current capacity? What are your expansion plans?Bevcon Wayors is two decades old and one of the leading material handling equipment manufacturing companies in Hyderabad with a pan-India presence. We believe our strong after-sales services give us an edge. For making our services more readily available, we have established full-fledged regional sales and service offices in Pune, Chennai, Jamshedpur, Bhubaneswar, Kolkata, Vadodara, New Delhi and Raipur.

These regional offices will offer services in sales and marketing, project management and construction and some of the regional offices have application and design engineering teams which will facilitate better and faster interactions with regional clients. All our offices are totally networked with video conferencing facilities and connected to the head office.

Further, Bevcon’s turnkey solutions include customised designing, manufacturing, installation and servicing of bulk material handling equipment. A majority of these equipment are manufactured at Bevcon’s facilities itself which provide customers greater flexibility in availing customised designs.

InTERvIEW


government regulations and policies that are impeding growth of the industry.

How do you compare your offerings with other foreign vendors seeking a pie of the Indian market?We are not just a manufacturing company. We create path-breaking solutions. Compared to others, ours is perhaps the most employee-friendly company having the best HR policies. Also, our emphasis on R&D, foreign collaborations and in-house manufacturing facilities make our products world class. Bevcon Wayors has major market share in turnkey execution of fuel (coal/coke/lignite) handling systems for thermal power plants across India and also executes various raw material handling projects for steel and cement plants. In addition, our multiple foreign collaborations help us to offer matchless services to our clients. Bevcon Wayors has also made conscious efforts to increasingly embrace technology to assist and sustain its growth. All processes at the company are SAP-

enabled. What sets us apart is that we don’t sell products but rather solutions for complex bulk material handling needs.

How important is innovation at Bevcon?Innovation is the lifeline for any organisation to sustain itself. Any innovative solution that is

cost-effective and reliable gives a customer immense confidence as well.

Innovation is a continuous process at Bevcon. We innovate in three areas – people, processes and products. Our in-house research and development group, called TDG, develops, on an average, 10-12 new equipment per year for various material handling needs. The core focus of the department is development of new products, validation of products and cost-effective solutions for critical applications. The group comprises subject matter specialists from various domains.

We also approached the Department of Scientific & Industrial Research (DISR) for recognition as an R&D hub.

Every innovative step lies in the challenge that every project brings with itself. Some of the innovations introduced are:

♦ Use of side-wall steep-angle conveyors for a critical application in material conveying at Tata Steel. Introduction of this equipment revolutionised the concept across other industry applications.

♦ Use of steep angle conveyors in wagon un-loading at a JK Cement plant changed the conventional concept of material handling.

♦ Introduction of sandwich conveyors for open pit mines was a breakthrough concept in conveying any mineral from the pit bottom to the surface by totally eliminating use of conventional trucks. It also minimises environmental degradation and brings down operational costs drastically and enhances productivity and product quality.

♦ Introduction of highly efficient “flip-flow screens” for screening high moisture materials, especially coal, has changed the dynamics of conventional screening methods in the power sector. In India, coal is the most sought-after fuel at thermal power units. The material is either imported or extracted from open-cast mines and stored in open areas, leading to high moisture absorption. The high moisture levels in the coal will be screened before it goes for boiler firing. The challenge lies in screening high-moisture coal. Conventional screening methods will not meet the demands of the plant. The flip flow screen has the ability to screen coal with moisture content of 40 percent and can work efficiently up to 90 percent screening.

2400 tph raw material handling system for DRI plant at Jindal Steel

800 TPH radial coal stacker for 70,000 tons stockpile capacity at IMFA

Sandwich conveyor for in-pit crushing and conveying

InTERvIEW


InTERvIEW

Vikrant Forge Ltd, the flagship company of Smithy Group,

commenced forging production in 1992 and grew continuously over the decade to emerge as the leading open die forge shop in India with world class manufacturing facilities near

Kolkata.Professionally managed by 200 people,

with key technical persons been trained in the leading forge shops of Europe and India, the company focuses on forging long-term ties with its customers.

In 2007, the company had opted for backward integration with its own steel

melting shop to create integrated melting-forging-machining facility as a seamless supply chain for customers.

In an exclusive interview to Rakesh Dubey of Steel Insights, R K Chhajer, Director, Vikrant Forge, says he sees no major threat from the Chinese players, since they do not guarantee quality and prefer to play in huge volumes, but competition is indeed there within the country and that too to the extent that the pie has shrunk with the entry of new players who have resorted to ruthless price under-cutting to gain market share.

Thus, Vikrant Forge’s immediate goal is to increase its customer base within the organised Indian market that is estimated at `1,250 crore and dominated by 4-5 “well-placed” players, including Vikrant.

Vikrant forges a secure future

Vikrant forges a secure future


InTERvIEW

What are the latest developments at Vikrant Forge?Vikrant Forge is an open die forging company wherein we process the forging, starting with the manufacture of ingots. We had recently undertaken a modernisation plan. With the capital investment made, we are now eyeing the finished components market, which could be crane wheels.

A few items are at a developmental stage. Mining machineries, for instance. However, I cannot give details at this juncture. But crane wheels are one item we have just developed for steel plants and ports. These are now a regular item on our shop floor.

What is the maximum capacity of the crane wheels?Starting with 650 OD, we make up to 1,100 OD. These include carburising and ready-to-use crane wheels.

Where have you supplied your products?In the recent past we supplied to Tata Grow Shop which looks after expansion at Tata Steel. L&T bought a lot of crane wheels from us for the expansion of Dhamra, Cochin and Vizag ports it has undertaken.

What is the group’s current turnover?The group turnover is around `300 crore but Vikrant Forge’s turnover is about `120 crore.

Which other business areas does the group have a presence in?We have another business called Arcvac Forgecast Ltd that makes forging ingots and forged bars. “Arc” stands for arc furnace and “vac” for vacuum degaser. We have an arc furnace with a ladle refining and vacuum degaser where we only make engineering steel in the shape of ingots, the latter being, as you are aware, the raw material for forgings.

This new company was started six years back and is a backward integration of Vikrant Forge wherein we make steel from scraps and ferro alloys. But, in the six years, we have been able to get a good market share so far as the ingot market is concerned. We supply to almost all the open die forging units which use ingots. We have

been able to establish the quality of the product to our customers. We have a 25-ton arc furnace and make ingots where a single piece ranges from 1.20-22 tons.

Who are your major clients in this segment?Bharat Forge is the market leader, apart from BS Forge, CSW Forge and Western India Forgings. These are four-odd companies which regularly buy from us, process the ingots to make the forgings. Vikrant is a sister company which buys ingots from Arcvac.

What is your turnover target, say in the next 2-3 years?Three years down the line, based on the present plants and equipment, Vikrant should have a turnover of `200 crore and Arcvac, `300 crore. We do not have plans for any new investment for the time being.

How is the market for the forging industry faring at present?The forging industry can be easily divided into two segments. One is “quality forging” and the other is what we call the dealer segment. When I talk of forgings or actual customers of quality forging, there are only 4-5 players like us in the market who account for the major part of the business and compete against each other. However, there is no dearth of orders!

We are all well placed and the competition is to the extent that the pie has shrunk and a lot of new players have entered who take on the market by bringing down the prices because they want more business. In a bid to get a foothold, they are offering prices which are not viable.

But then we also have to be in the business. However, we must keep two aspects in mind. First, I cannot get cut off from the customers because I have been doing business with them for almost 20 years. Secondly, we have to work within the competition because the customer may otherwise feel my company does not want the order. The customer should never be allowed to feel that the supplier or for that matter the manufacturing company which is supplying, is not interested in getting the business.

As with any other product or market, we too are facing competition and prices and margins are under pressure, though there are enough orders. There is no problem so far as my topline is concerned, but the bottomline is getting pressurised.

What is the share of exports in the total `120-crore turnover of Vikrant Forge?Vikrant Forge is into exports in a big way. Last year, for example, the export turnover was almost 35 percent of the total turnover of Vikrant Forge. This year, I expect Vikrant Forge to register a turnover of


InTERvIEW

about `140 crore of which around `65 crore would comprise exports. This means almost 50 percent of the revenues will come from exports. Thus, there is likely to be a jump in both total sales and exports turnover in 2014-15.

Which geographical locations are exports mainly focused on?We mainly export to European or developed nations. There are no exports to Third-World or developing countries. A few customers are based in Europe, but they have units in China too. These European companies do not have approved sources in China and, as per these companies’ policy, they try and buy from the nearest geographical centres. We being nearest to China rather than Europe, where they have their own base, they source from us or other Indian companies.

The Chinese market for forgings would be 20 times larger than that of India but still the European companies do not have any approved source there. As a result, we supply in volumes. The orders come from the principal based in Germany or any European country, but the material is delivered to their China units.

To give you an example, though this is not an apple-to-apple comparison, General Motors has a unit in China, but it buys a lot from Bharat Forgings in India and not Chinese forging companies. That is how we operate in our segment.

Where is Vikrant Forge placed compared to Bharat Forge?In terms of size, we would be one-tenth of Bharat Forge, which is very large. It is also the market leader and a pioneer in this space. But we are the No.2 in open die forging in India after Bharat Forge in terms of value and quantities despatched.

Bharat Forge can be divided into two segments.

Last year, its revenues amounted to `3,200 crore. Of this, the open die forgings or what we call industrial forgings, comprised only about `300 crore. The rest came from closed die forgings which are mainly automobile components and railway parts, a segment we are not present in.

But, we must compare that `300 crore topline achieved by its industrial forgings

segment to our `120 crore, though the overall size of Bharat Forge is much larger.

In which segments do open die materials go?They go into large machineries. Be it coal mining, steel plant. Say, a thermal power plant of NTPC is being set up. There would be vendors. For example, L&T may set up that plant. In that case, L&T will buy the material from us and not NTPC.

Similarly, in the case of an upcoming steel plant, where conveyor belts running into several kilometres would be required for transportation of coal or iron ore or any other raw material, forgings would play a role. But then the EPC would be done by some other company like L&T etc.

BHEL, for example, is a very large customer of ours. It buys a lot of material from us towards power plant equipment.

Production of any large machine will involve open die forgings. Any movement that involves a lot of wear-and-tear, forgings which will provide a comfort zone.

For example, a goods train has wheels made of casting. But a passenger train’s wheels are forged, because passenger safety comes into play here. Instances where forging is used have an almost life-time usage so you can imagine how strong these have to be.

Nowadays we talk of zero-defect forgings where the ultrasonic standards are very high. For example, the gear-box industry is a very large consumer of forgings.

All moving parts in any machinery comprise a larger customer base for the forging industry.

The European gearbox makers are also our customers. The offshore gear box plants being put up for production of wind power are supposed to run every single day, non-stop for 10 years! There is no scope for maintenance. So you can imagine the quality of a wheel running non-stop for such a long period.

After 20 years, a ship is generally condemned and retired to the ship-breaking yard to be broken and sold as scrap. Here too, a ship’s shaft stands the test of time. It is known to be further machined by 10-20 mm to be used as a new product, where it still passes stringent tests! That is the longevity of forgings.

It seems the Indian forging industry is making a mark in the world market. How do you see competition from China in this respect?As I said earlier, my European customers do not have an approved source in China. In such a situation, we do not see any competition from China. China may not be very high on pricing, but quality is not guaranteed. Of course, if the Chinese players make products for General Motors, then, surely they maintain quality. But our industry does not play in large volumes. The Chinese are not too interested because they generally talk in terms of thousands of kilograms or even tens of thousands of kilograms!

Three years ago, L&T had once imported a Chinese consignment but it was rejected. The company, reportedly, has decided to go slow on Chinese imports, though, at that juncture, it had reasoned that the pricing was 30-35 percent lower than ours. The company has switched back to sourcing from us. Therefore, I do not see any competition from China, where quality forgings are concerned.

Which way is the global scenario headed?I think some green shoots are visible in Europe and America seems to have stabilised.

India would probably start improving 12 months after the new government settles in.

It would be a problem if the government

As with any other product or market, we too are

facing competition and prices and margins are under pressure, though

there are enough orders. There is no problem so far

as my topline is concerned, but the bottomline is getting pressurised.


formed is highly divided with several regional players holding 30-35 seats. A stable government is required to give the much-needed push to industry.

Many projects had been held up. However, a few are being cleared, POSCO, for instance. So far as we are concerned, whenever there is growth in infrastructure, there will be requirement for our kind of products.

Once infrastructure starts moving, the steel industry would move too, along with cement… there will be a positive cascading effect.

What kind of strategies are you are planning to adopt to fight an uncertain future?We are trying to increase the customer base. And that should help, because if my capacity is “X” amount, for which I have 60 customers instead of 30 then sale of that capacity is guaranteed.

Once my customer base increases, I would be in a better position to be more selective. Today, may be, I have to deal with customers who do not pay the price I demand or even pay on time. A large customer base will help to widen my spread.

That is our immediate target. From next year, we will focus on getting at least 20 percent more customers every year than what we have today. And, if these are quality customers, then I need not be worried.

What would be your strategy to maintain the quality of your products?It is said that one fish makes a pond dirty. So we do not want to indicate to our workers that they can get away with producing products of inferior quality. For us, quality is supreme. During the last three years, the rejection rate from our customers has been zero percent. The inspection is

done at our plant itself so that there is no rejection from the customer-end.

For us, every single kilogram undergoes rigorous testing and comes with a test certificate, which allows for a high level of traceability. Even a quantum of material used three years back can be traced! And when I say zero rejection rate, the material can be traced for verification.

What could be the possible size of the open die forging market?The open die forging market in India should be `2,500-`3,000 crore per annum. Out of this, the share of the organised sector, (which comprises only five or six players), is around `1,250 crore and the balance belongs to the unorganised sector.

If the market is `3,000 crore, then the organised market’s share is roughly 42 percent at `1,250 crore market and the unorganised, dealer segment’s share is the balance 58 percent.

There are hundreds of units in Howrah (West Bengal), Mandi Govindgarh in Punjab and Ghaziabad in Uttar Pradesh.

These units are not quality conscious since they do not get the prices nor do they require to play in volumes. They also source from the local market. For large players like us, at least a single truck-load of despatch would make sense and allow me to reap logistics benefits.

You said you would be looking at a diversified customer base. Which segments would you focus on?The segments would remain the same –gearbox makers, engineering, procurement and construction (EPCs) players who would be working for steel plants, infrastructure projects, ports, power and mining equipment makers, etc. The segment would be the

same, but the number of customers will have to increase. Say I have 30 customers, and I am a supplier to BHEL. I must find out who are the other operators in the same space.

Similarly, we supply to gear-makers in India, which has small share in the global gear industry. Hence, we have to reach out to the vast 90-95 percent out there globally.

What is Vikrant Forge’s production capacity?

When we talk of forging, we do so in terms of black forgings. Here, our capacity is around 25,000 tons per annum. This is much lower compared to Bharat Forge’s 60,000 tons per annum. The other major players in the organised sector have a capacity of 10,000-20,000 tons per annum. We have a plant at Dankuni on Durgapur Expressway in West Bengal.

Do you have any plans for an IPO?

Ours is a closely-held company even though we write it as a limited company. But shares are held only by our family members. We do not have any plan to go for an initial public offer (IPO) because we are also not looking at expansion or capital investment for the next 3-4 years.

Even though we have a debt component, we would not like to reduce it through an IPO. We sincerely feel that debt is anytime better than raising funds through an IPO because then one has to go after results to show the same to shareholders. Also, a lot of issues have to be disclosed. One has to undergo a lot of scrutiny.

Here, only our banker knows what is happening in our company… it is a closed-door affair.

What are the company’s future plans?

We are very bullish on the Indian market and feel it will grow at a faster clip in the next two years. We would like to grow very fast in the next one year. Our performance between 2003 and 2007 was good, with high margins and EBIDTA levels of 40-45 percent. We are quite hopeful that we would regain such high margins from the current levels of 17-18 percent.

We expect high profit margins from the second half of 2014-15 onwards.

InTERvIEW


Till date the foundry industry does not have a nodal ministry. Are the industry stakeholders thinking of aligning themselves with any? Indeed, talks are under way.

The foundry industry is an intermediate sector. Being characterised as such, there is a marked lack of parentage, so to speak. As a result, during a time of crisis, the industry stakeholders do not have a body to turn to for getting their problems addressed. Thus, at the Indian Institute of Foundrymen (IIF) we feel it is important to have the government as a parent who will understand the issues confronting the industry. Today the word “change” is the only constant element and it holds true for the foundry

industry as well. Many large and some of the medium foundries have come forward to modernise their production processes through investments in technology. But that is not the case in general. With 85 percent of the foundries in the small-scale segment, an across-the-board change will not happen overnight.

Hence, the foundry industry, through the IIF, is working with the Ministry of Small & Medium Enterprises (MSME) and Department of Industrial Policy & Promotion (DIPP) in the central government to set up a Foundry Development Council (FDC). The response from the government in this regard has been encouraging.

IIF particularly has the interest of the small-scale foundry segment in mind and such a council, once set up, would help address issues, which confront this segment.

What is the status of this proposal?We have had several rounds of meetings with the relevant ministries and have submitted our formal proposal, highlighting the various factors, such as the export promotion-import substitution aspects, employment potential, skilling needs of workmen, etc.

Can you elaborate on the FDC’s agenda?We, at IIF, are deliberating on the same. IIF is holding its annual flagship event, titled

‘Foundry needs a parent in the government’

The Indian foundry industry is the world’s third largest in terms of production and second largest in relation to the

numbers of units, which varies between 4,500 and 5,000 (China is the largest and the US comes second). It is also known as the mother industry because, without casting components, no engineering process would be possible. According to the 46th world casting census, as per modern casting, India is in the third position in terms of tons of castings produced. The country has produced 9.994 million tons in 2011 and the industry is growing at a CAGR of six percent since 2006-07. Due to growing demand from the automobile sector, coupled with demand from other areas like infrastructure, construction, agriculture etc., the foundry market is expected to grow strongly in the near future. And yet, in India, foundries have never been put under any ministry. As a result, all its problems have remained unresolved, Suparno Moitra, Director General, Indian Institute of Foundrymen (IIF), told Madhumita Mookerji of Steel Insights. The IIF is working towards bringing the industry under the ambit of the Ministry of Small & Medium Enterprises (MSME) industry and setting up a Foundry Development Council as well for single-window deliberations on all key issues.

InTERvIEW


InTERvIEW

Indian Foundry Congress (IFC), along with an exhibition (IFEX) on February 7-9, 2014, at Gandhinagar, Gujarat (see box), which will see participation from across the globe. Industry leaders would assemble there and deliberate threadbare the key issues concerning the industry and, taking a cue from the same, we would be in a better position to understand what could be the agenda of the FDC. But for sure, FDC, once it is set up, would become an important platform for industry stakeholders to engage, discuss, debate and find solutions for the betterment of this industry.

Till date, there is no representative body for Indian foundries…IIF is the apex body for the foundry industry in India. It is a pan-India body, making its presence felt across 26 geographies in India, with four regional offices and three centres of excellence. IIF represents the cross-section of the industry – foundries, equipment manufacturers and material suppliers.

IIF was thinking of proposing to the government that the status of the foundry industry should be changed from “red” to “orange/green”. What is the status of that proposal?We had detailed meetings with the Ministry of Environment & Forests (MoEF), Government of India, last September on possible pathways for migrating the foundry industry from the red to orange/green label, as the case may be.

Silica sand is a scarce commodity today. Also, it cannot be imported like coal or other input materials. So how is the foundry industry coping with this issue?IIF is trying to sensitise the foundries on sand reclamation in clusters.

The Belgaum foundry cluster in Karnataka is one such an example. We are trying to organise visits for foundries to such clusters to promote best practices.

How difficult is it to get the right work force today?Every industry is battling with this issue and the foundry industry is no exception. We are working very closely with the industry leaders to assess their workforce skill requirements and, at the same time,

pass on these inputs to the academia, so that such knowledge and skills could be imparted amongst students. We also run refresher courses for people already engaged in this industry to make them relevant.

Is the IIF thinking in terms of harnessing the metallurgy talent pool? What can be done to leverage the student community’s design capabilities and new-age thinking? India has got talent and IIF plans to work with the academia and the student community to help indigenise energy efficiency and pollution control devices, which could be cost-effective and useful

and adopted by the industry. This will help reduce our dependence on imports and at the same time help the student community to hone their skill-sets and make them contribute to the benefit of the industry and economy as a whole.

Going forward, new technologies, environmental norms etc. could change the face of the Indian foundry industry. But are all the units ready to adopt such a model in future, because this is a highly fragmented sector?In my opinion, this sector could witness a lot of mergers and acquisitions, thereby leading to reduction in the number of foundries as well as consolidation in the foundry industry. There will be no alternative, but to scale up. Mortality rates could be high for the smaller ones.

Overall, in a nutshell, what are the key challenges IIF is addressing at present?This industry suffers from the PPTFCQ syndrome:

P: PerceptionP: PeopleT: TechnologyF: Funding issues C: Costing issuesQ: Quality issuesPerception IssuesBusiness continuity: This is regarded as

a dirty business and lack of commensurate returns is making it disinteresting for the young generation of successors to take over the reins.

People issues: the industry is unable to attract fresh talent.

Technology issues: The majority of foundries are still pursuing dated production processes. There is lack of energy-efficient devices.

Fund issues: The industry needs more support from banks/financial institutions.

Cost issues: The cost of manufacturing is on the rise.

Quality issues: This aspect needs immediate attention.

As for funding, IIF wants to increase interactions with banks and FIs to facilitate the funding and credit linkages.

Once all factors are set in motion, then automatically, quality too will not remain an area of concern.

Foundry congress to be held in GujaratThe Indian Institute of Foundrymen (IIF) will hold its 62nd Indian Foundry Congress at Gandhinagar in Gujarat on February 7-9, 2014.

The event will be a national meeting ground for all practicing foundrymen, along with all those associated with this industry – manufacturers and suppliers of foundry plants and equipment, foundry materials, academia, consultants and customers.

According to Reena Bhagwati, President, IIF, the foundry industry has been facing, for the last few months, a demand crisis because of the reduced production figures of 30-40 percent in the automotive and light commercial vehicles sector, a major customer of the industry. This downward trend, she says, is not likely to improve in the near future but adds that the foundry industry is resilient enough to bounce back.

The 62nd IFC and IFEX 2014 will feature programmes like Cast India Expo, buyer-seller meet and plenary sessions among other events.

IFEX is India’s leading fair on foundry technology.

The IIF, established in 1950, is affiliated to the World Foundry Organisation.


CORPORATE


JSW Steel reported a 47.33% drop in its third quarter (Q3) net profit to `455.01 crore against `864 crore registered in the

same quarter of the previous fiscal.Net sales for the period under review (Q3

of 2013-14) rose 50.94 percent to ̀ 13,383.38 crore over `8,866.20 crore reported in the same quarter of the previous fiscal.

These results are reported after giving effect to the Scheme of Amalgamation and Arrangement (“the Scheme”) between the company and JSW ISPAT Steel Limited and others, which became effective June 1, 2013 with the appointed date of July 1, 2012. The figures for the corresponding quarter are not strictly comparable with that of the current quarter as the effect of implementation of the

Scheme is included in the current quarter’s figures, the company said in a release.

During the quarter, the company achieved the highest-ever crude steel production (3.19 million tons, showing a 52 percent growth y-o-y), highest-ever consolidated exports of 1.0 million tons (accounting for 60 percent of India’s overall steel exports) and the highest-ever consolidated EBIDTA of `2,409 crore.

Amidst a challenging operating environment marked by muted domestic demand growth, the company said it has achieved 100 percent of its production and sales volume guidance for FY’14 (on a pro-rated basis).

Crude steel output up 44% y-o-y in DecJSW Steel Limited reported a 44 percent year-on-year (y-o-y) increase in its crude

The break-up of production

particulars Dec. ’13 Dec. ’12 (Reported)

Dec.’12 (pro forma)*

Growth

Reported

Crude Steel (mt) 1.05 0.73 0.95 43.83% Crude Steel (mt)

Rolled products : Flat (mt) 0.87 0.61 0.82 42% Rolled products : Flat (mt)

Rolled products : Long (mt) 0.15 0.15 0.15 -1% Rolled products : Long (mt)

*Re-classified for the purpose of comparison after giving effect to the Scheme of Amalgamation and Arrangement

JSW Steel’s crude steel output for the first nine months of 2013-14

JSW Steel’s crude steel production

Volumes (lakh tons) 2013-14

Volumes (lakh tons) 2012-13

December 10.5 7.30

November 10.72 6.03

October 10.62 7.62

September 10.04 5.20

August 9.85 7.63

July 9.91 8.87

June 12.1 7.01

May 10.13 7.24

April 6.37 7.15

Total 90.24 64.05

Source: Insights research

steel production for December 2013, at 10.5 lakh tons against 7.30 lakh tons reported in the same month in the previous fiscal.

Month-on-month, crude output is down 2.05 percent over 10.72 lakh tons reported in November.

For the first nine months of the current fiscal, total production is thus at 90.24 lakh tons against 64.05 lakh tons recorded for the same period in the previous year, a growth of 40.88 percent year-on-year.

Quarter–on-quarter (q-o-q), the company reported a growth of 52 percent in crude steel production for the third quarter (Q3) of FY 2013-14, at 31.90 lakh tons over 20.90 lakh tons reported in the same quarter in the previous fiscal.

The company achieved crude steel production of 5.84 million tons in the first half of FY2013-14 over 43.1 lakh tons notched up in the same period in the previous fiscal, showing a growth of 35.49 percent (on pro-forma basis, three percent) over the corresponding period of last year.

JSW Steel had taken a shutdown of one of its Corex furnaces for relining and capacity enhancement during the quarter and the same recommenced production from September 12, 2013.

JSW Steel, belonging to the JSW Group and part of the O P Jindal Group, is one of the lowest cost steel producers in the world. The group has diversified interests in mining, carbon steel, power, industrial gases, port facilities, aluminum, cement and information technology.

JSW Steel Q3 net drops 47.3%


CORPORATE

Rashtriya Ispat Nigam Limited (RINL) has recorded an increase in sale of saleable steel, iron and steel

products, special steel and wire rods, by 12 percent, 11 percent, 11 percent and 43 percent, respectively during January 2014 as compared to the corresponding month of last year, the company said in a statement.

In fact, production of value-added steel stood at 2.42 lakh tons during January, the best performance for any January since inception, the statement said.

The hot metal, liquid steel, saleable steel production and power generation recorded a growth of two percent, 12 percent, 10 percent and eight percent, respectively as compared to January 2013.

The turnover stood at `1,309 crore in January, recording a growth of eight percent.

With this, the cumulative turnover of RINL from April 2013-January 2014 reached a high of `10,406 crore,

representing a growth of three percent over the corresponding period last year which was at `10,088 crore.

Sales of new products commenced with the despatch of 200x200 blooms produced from SMS-2.

On the techno-economic parameters, the specific heat consumption at blast furnace, billet mill, specific power consumption at blast furnace and medium merchant structural mill (MMSM) are the best for any January since inception.

The BF productivity and labour productivity registered an growth of 29 percent and five percent, respectively when compared to the corresponding period last year.

RINL’s sales increase 12% in January y-o-y


Finnish steel major Outokumpu has won a 700-tons order in India and plans to focus on selling premium

grade steel to nuclear and thermal power projects in the country alongside its plans to put a thrust on areas such as oil and gas and coastal bridges, media reports said.

“Outokumpu’s main focus in India has been to support the needs for high-end stainless steel grade products in critical fields of emerging infrastructure, namely oil and gas, energy, nuclear and thermal plants, water treatment and desalination industries,” the company said in a statement.

The company has won order for the

supply of 700 tons of high performance heat resistant grade of steel to Thermax Ltd for the construction of a thermal power plant in India, the statement said.

“Outokumpu has been closely working with Thermax in many of its boiler projects for thermal power plants. Components manufactured from this high-temperature grade chosen by Thermax are used for a specific part of the boiler, known as “impact separators,” said Yatinder Suri, Head, Outokumpu Sales in India.

On the other hand, Rajan Nair, Executive Vice-President, Thermax, said, “For our project of supplying and commissioning 9 circulating fluidised bed combustion boilers for a petrochemical complex in India, we chose Outokumpu. “

Outokumpu bags 700-tons order

in IndiaSteel Insights Bureau

Jindal Steel & Power Limited (JSPL) Chairman Naveen Jindal met Odisha Chief Secretary J K Mohapatra to discuss

the development of JSPL’s Angul plant during a meeting on January 21, 2014.

Jindal reportedly said that JSPL’s Angul plant will reach 6 mtpa capacity by 2015. Jindal further said JSPL has already completed its 2.5-mtpa capacity addition in the first phase of its proposed 6 mtpa greenfield integrated steel project at Angul.

A memorandum of understanding (MoU), to set up an ambitious `75,000-crore coal to liquid (CTL) project was likely to be signed with the state government during the current year.

According to company sources, some

critical units of the steel mill at Angul had already been completed and the construction of the first phase of the steel project was being carried out on war footing. The first phase is likely to go on stream very soon and

the upgrading of the plant to 6 mtpa would be completed by end of 2015. The company had already invested ̀ 20,000 crore in the first phase of the steel project.

According to official sources, the project is being delayed due to lack of coal block allocations and coal linkages. While the Union coal ministry had reviewed the coal block and the execution deed was pending with the state government, Jindal is trying to request the state government to impress upon the Union coal ministry to ensure that the allocated coal block in question is not cancelled. Similarly, the company is also trying to tie up with Odisha Mining Corporation (OMC) for iron ore linkage.

JSPL Angul plant construction

on trackSteel Insights Bureau


duty on iron ore. The major ports together handled 17.81 mt of iron ore in the April-December period, compared to 21.77 mt handled in the same period last year.

Movement of thermal coal through the major ports was up 29.05 percent to 54.12 mt during Apr i l -Decembe r, compared to 41.94 mt achieved in the same period last year.

Vishakhapatnam Port handled the highest volume of 9.19 mt of iron ore in April-December. This volume, however, was higher than the iron ore traffic moved through the port in the same period last year.

Movement of

container traffic in terms of tonnage fell 4.48 percent in April-December. The major ports handled 85.23 mt of tonnage in April-December compared to 89.23 mt in the same period last year.

Among the major ports, Paradip Port had the distinction of handling the highest volume of thermal coal of around 18.52 mt in April-December. Mormugao Port handled the highest quantity of 5.60 mt of coking coal during the period.

Movement of coking coal through Paradip and Mormugao ports increased during the period when compared to the corresponding period last year.

Six major ports showed positive growth in traffic handling during April-December, while the remaining six showed negative growth on a year-on-year basis.

In terms of growth, Ennore Port topped the list with 62.14 percent increase in cargo throughput. V.O. Chidambaranar Port’s growth was the lowest, at about 1.30 percent during the period. In terms of traffic volumes, Kandla Port clinched the top rank with cargo volumes of 66.08 mt recorded for the period.

Mormugao Port registered the highest decline of 42.59 percent in traffic handling during the period due to a fall in iron ore exports.


The 12 major Indian ports handled 413.01 million tons (mt) of traffic during April-December, 2013-14,

which is about 1.91 percent higher than 405.27 mt recorded during the same period last year.

According to data released by the Indian Ports Association (IPA), the country’s major ports handled a total of 25.20 mt of coking coal in April-December, up 20.53 percent compared to the same period last year.

Movement of iron ore through the major ports showed a significant drop of 18.18 percent in April-December due to restrictions on mining and hike in the export

Traffic handling by major ports up 1.91% in April-December

LOGIsTICs

Traffic handled at major ports(During Apr-Nov, 2013* vis-a-vis Apr-Nov, 2012)

(*) Tentative (in '000 tons)

portsApril to December traffic % variation against

prev. year traffic2013* 2012

KOLKATA

Kolkata Dock System 9229 8666 6.5

Haldia Dock Complex 21506 20198 6.48

TOTAL: KOLKATA 30735 28864 6.48

PARADIP 50858 40749 24.81

VISAKHAPATNAM 43067 44201 -2.57

ENNORE 19801 12212 62.14

CHENNAI 38098 39896 -4.51

V.O. CHIDAMBARANAR 21224 20951 1.3

COCHIN 15603 14893 4.77

NEW MANGALORE 29344 27025 8.58

MORMUGAO 8565 14918 -42.59

MUMBAI 43644 44092 -1.02

JNPT 45991 47977 -4.14

KANDLA 66084 69497 -4.91

TOTAl: 413014 405275 1.91

Source: IPA


LOGIsTICs

`3,694.27 crore in December 2013 compared to `3,347.22 crore in the same month last year.

Overall, the Railways’ revenue earnings from commodity-wise freight traffic rose year-on-year in December, to `8,635.38 crore, up 15.36 percent compared to `7,485.27 crore earned in December 2012 and also up by 9.58 percent from `7,880.44 crore earned in November 2013.

Revenues from transportation of cement in December 2013 stood at `754.63 crore (9.29 mt) compared to `684.25 crore (8.26 mt) in November 2013, while that from foodgrains transportation fell to `653.89 crore (4.32 mt) in December 2013 from `575.88 crore (3.71 mt) in November.

However, the Railways’ revenues from transportation of fertilisers in December 2013 fell by 3.48 percent to `472.73 crore (4.22 mt) from `489.75 crore (4.39 mt) in November.

Revenues from transportation of petroleum oil and lubricants (POL) in December 2013 stood at `506.02 crore (3.65 mt), while the same from pig iron and finished steel from steel plants and other points were at `524.9 crore (3.42 mt). Revenues from container services were at `378.48 crore (3.99 mt) and from transportation of other goods at `586.32 crore (6.48 mt).


Indian Railways’ (IR’s) revenues from transportation of iron ore for exports, steel plants and for other domestic users

in December 2013 rose to `914.52 crore, up 4.61 percent from `874.23 crore reported in November, 2013, according to information available with Steel Insights.

The quantity of iron ore transported, however, marginally rose 4.34 percent to 10.91 mt in December compared to 10.58 mt in the previous month.

IR transported 44.37 million tons (mt)

of coal in December 2013, up 11.18 percent from 39.91 mt reported in November 2013.

Revenue earnings of IR from transportation of coal also rose to `3,694.27 crore in December 2013 from`3,293.18 crore recorded in November 2013, mainly due to an increase in the freight charges with effect from October 1, 2013 and also higher transportation volumes of the material.

However, compared to last year, transportation of coal in December 2013 fell 0.25 percent from 44.48 mt in December 2012. In fact, Railways’ revenues from coal transportation surged 10.37 percent to

Railways’ iron ore handling up 4.34% m-o-m in Dec

Commodity-wise revenue

CommodityQuantity (in mt) Earnings (in `cr)

Dec 2012 Dec 2013 Dec 2012 Dec 2013

COAl

i) For steel plants 3.71 4.2 214.51 265.63

ii) For washeries 0.11 0.13 2.21 5.9

iii) For thermal power houses 28.33 29.41 2,317.78 2,532.36

iv) For public use 12.33 10.63 812.72 890.38

v) Total 44.48 44.37 3,347.22 3,694.27

Raw material for steel plants except iron ore 1.24 1.51 129.62 149.62

pIG IRON AND FINISHED STEEl

i) From steel plants 2.36 2.57 370.98 446.2

ii) From other points 0.66 0.85 69.42 78.7

iii) Total 3.02 3.42 440.4 524.9

IRON ORE

i) For export 0.11 0.92 28.24 237.9

ii) For steel plants 5.2 5.52 233.75 255.06

iii) For other domestic users 4.16 4.47 319.51 421.56

iv) Total 9.47 10.91 581.5 914.52

Cement 8.72 9.29 670.22 754.63

Foodgrains 4.24 4.32 596.54 653.89

Fertilizers 4.38 4.22 480.22 472.73

Mineral oil (pOl) 3.45 3.65 402.39 506.02

CONTAINER SERVICE

i) Domestic containers 0.79 0.96 85.79 106.28

ii) EXIM containers 2.64 3.03 249.82 272.2

iii) Total 3.43 3.99 335.61 378.48

Balance other goods 5.79 6.48 501.55 586.32

Total revenue earning traffic 88.22 92.16 7,485.27 8,635.38


mARkET REPORT

World crude steel production in ‘000 tons

Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Dec 13 / Dec 12 (% Change)

European Union (27) 13,429 13,249 14,377 14,112 14,633 14,081 13,549 11,997 14,279 14,699 14,255 13,124 11.49%

Other Europe 2,980 2,769 3,117 3,052 3,261 3,146 2,968 2,758 3,197 3,261 3,275 3,026 1.52%

C.I.S. (6) 9,065 8,624 9,460 9,133 9,399 8,956 9,039 9,165 8,930 8,875 8,561 9,157 5.34%

North America 10,122 9,385 10,160 9,667 9,891 9,529 10,143 10,219 9,940 10,193 9,855 9,999 1.38%

South America 3,634 3,478 3,859 3,883 4,051 3,846 3,958 4,049 4,044 4,092 3,702 3,624 8.47%

Africa 1,378 1,146 1,242 1,318 1,462 1,309 1,329 1,310 1,384 1,395 1,317 1,309 13.41%

Middle East 1,987 2,045 2,135 2,091 2,229 2,175 2,206 2,206 2,149 2,278 2,174 2,214 21.93%

Africa/Middle East 3,366 3,191 3,377 3,408 3,691 3,484 3,535 3,516 3,533 3,673 3,491 3,523 18.62%

China 63,622 61,830 66,293 65,650 67,034 64,664 65,472 66,277 65,424 65,081 60,879 62,350 8.14%

India 6,766 6,414 6,836 6,512 6,785 6,528 6,668 6,578 6,540 6,760 6,250 6,908 4.63%

Japan 8,863 8,321 9,453 9,169 9,625 9,280 9,291 9,144 9,289 9,518 9,263 9,336 8.98%

South Korea 5,928 4,979 5,667 5,498 5,529 5,457 5,553 4,890 5,165 5,918 5,594 5,857 1.64%

Taiwan, China 1,776 1,551 2,057 2,035 1,952 1,848 1,875 1,975 1,638 1,710 1,780 1,880 6.42%

Asia 86,955 83,095 90,306 88,864 90,924 87,777 88,859 88,864 88,056 88,988 83,767 86,332 7.44%

Oceania 491 458 465 467 485 445 480 482 450 481 457 407 -9.71%

Rest of the world except China 66,421 62,419 68,828 66,937 69,303 66,599 67,059 64,774 67,005 69,181 66,485 66,841 6.49%

World 130,043 124,249 135,121 132,587 136,337 131,263 132,532 131,050 132,429 134,262 127,364 129,191 7.28%Source: WSA

Sanjoy Bag

World crude steel production for the 65 countries reporting to the World Steel Association

(Worldsteel) has gone up by 1.43 percent to 129.191 million tons (mt) in December 2013 compared to 127.364 mt reported in November 2013. Crude steel production for December 2013 was up by 7.28 percent to 129.191 mt compared to the figure in December 2012.

World crude steel production for the 65 reporting countries was 1,576 mt in 2013, an increase of 4.10 percent compared to that in 2012.

In December 2013, Asia produced 86.332 mt of crude steel, an increase of 7.44 percent over the same month in 2012. The European Union (EU) produced 13.124 mt of crude steel in December 2013, up 11.49 percent compared to the same month in 2012. North America’s crude steel production in December 2013 was at 9.999 mt, 1.38

percent higher than in the corresponding month of 2012.

China, the single largest producer, manufactured 62.350 mt of crude steel in December this year, an increase of 8.14 percent compared to the corresponding period in 2012, when production stood at 57.656 mt. However, month-on-month production saw an increase of 2.42 percent compared to the November 2013 production figure of 60.879 mt.

Elsewhere in Asia, Japan produced 9.336 mt of crude steel in December 2013, a rise of 8.98 percent compared to the same month last year. India’s production for December 2013 stood at 6.908 mt, up by 4.63 percent compared to December 2012. South Korea produced 5.857 mt during the same period, a 1.64 percent increase over the same month in 2012.

In the EU, Germany produced 3.4 mt of crude steel in December 2013, an increase of 12.8 percent compared to the same month in 2012. Italy produced 1.8 mt

Global crude steel output up 1.43% in Dec m-o-m

of crude steel, 4.4 percent higher compared to that in December 2012. Spain’s crude steel production was 0.91 mt, an increase of 11.6 percent over December 2012. France’s production was 1.2 mt, showing an increase of 22.3 percent on December 2012.

In December 2013, Russia produced 5.8 mt of crude steel, an increase of 3.8 percent compared to the same month in 2012. Ukraine’s production was 2.7 mt in December 2013, an increase of 4.2 percent over the same month in 2012.

In December 2013, the US produced 7.2 mt of crude steel, up by 0.4 percent compared to December 2012 and Turkey’s crude steel production for December 2013 was 2.9 mt, up by 1.9 percent compared to December 2012.

The 65 countries’ utilisation ratio of crude steel capacity in December 2013 was 74.2 percent and is 2.2 percentage points higher compared to December 2012 and 1.43 percentage points higher than in November 2013. It is to be noted that the March-December, 2012 data covers 62 countries while March-December, 2011 covered 64 countries. In January and February, 2012, only 59 countries were covered as three African countries – Algeria, Libya and Morocco – and two Middle East countries – Iran and Qatar – did not provide monthly production statistics. In January-December, 2013 around 65 countries were covered.


InTERnATIOnAL

India remains 4th largest steel producer in 2013


India’s position in world’s steel production remained unchanged at the fourth slot in 2013 with an output of 81.2 million tons

(mt). This is despite India logging the second highest growth of 5.1 percent among the top five producers.

There was no change in the top order of the three steel-producing nations with China, Japan and the US retaining their slots in the respective rankings in 2013, World Steel Association (WSA) data revealed.

India was the fourth largest steel-maker in the previous three years as well with a total output of 77.3 mt 2012, 73.6 mt in 2011 and 69 mt in 2010. It had clinched the third spot in 2009.

“World crude steel production reached 1,607 mt for 2013, up 3.5 percent compared

to that in 2012. The growth came mainly from Asia and the Middle East while crude steel production in all other regions decreased in 2013 compared to 2012,” WSA said.

Asia produced 1,081 mt steel in 2013, recording a growth of six percent. The region’s share of world steel production increased slightly from 65.7 percent in 2012 to 67.3 percent in 2013.

Country-wise, China produced 779 mt, an increase of 7.5 percent over 2012. Its share in world crude steel production increased from 46.7 percent in 2012 to 48.5 percent in 2013. Japan produced 110.57 mt and South Korea 66 mt in 2013.

The Middle East produced 26.3 mt steel, up 6.8 percent over 24.7 mt produced a year ago.

“The EU recorded a decrease of 1.8 percent compared to 2012, producing 165.6

mt of crude steel in 2013,” WSA said, adding the production in North America was 119.3 mt, a dip of 1.9 percent. The US produced 87 mt, down by two percent over 2012.

CIS countries produced 109 mt steel during the year, down 1.8 percent. Russian production was at 69.4 mt, a decrease of 1.5 percent over 2012. South America’s production was at 46 mt, down 0.8 percent.

China48.5%

Japan6.9%

USA5.4%

India5.1%

Russia4.3%

South Korea4.1%

Brazil2.1%

Ukraine2.0%

RoW11.3%

EU-2710.3%

China46.7%

Japan6.9%USA

5.7%

India5.0%

Russia4.5%

South Korea4.4%

Brazil2.2%

Ukraine2.1%

RoW11.6%

EU-2710.9%

Share of world crude steel production 2013 , 2012

Top 10 steel producing countries (million tons)

Rank Country 2013 2012 Variation %

1 China 779 724.7 7.5

2 Japan 110.6 107.2 3.1

3United States

87 88.7 -2

4 India 81.2 77.3 5.1

5 Russia 69.4 70.4 -1.5

6South Korea

66 69.1 -4.4

7 Germany 42.6 42.7 0

8 Turkey 34.7 35.9 -3.4

9 Brazil 34.2 34.5 -1

10 Ukraine 32.8 33 -0.5


PRICE DATA

Indicative market price for December 2013Steel Insights Bureau

Sl. No. ITEM Kolkata Delhi Mumbai Chennai

1 PIG IRON 31130 32500 30000 30980

2 BILLETS 100 MM 39810 40000 42000 40610

3 BLOOMS 150X150 MM 38680 38740 40760 38490

4 PENCIL INGOTS 33420 31500 35500 34850

5 WIRE RODS 6 MM 45470 45760 47990 47380

6 WIRE RODS 8 MM 44960 45170 47210 46740

7 ROUNDS 12 MM 44370 45440 45750 45650

8 ROUNDS 16 MM 44370 45440 45790 45560

9 ROUNDS 25 MM 44050 45270 45490 45430

10 TOR STEEL 10 MM 46050 47960 47640 47120

11 TOR STEEL 12 MM 46450 47600 48050 47890

12 TOR STEEL 25 MM 46300 47600 47910 47710

13 ANGLES 50X50X6 MM 45970 45760 47870 47270

14 ANGLES 75X75X6 MM 44940 45170 46920 46590

15 JOISTS 125X70 MM 45850 45930 48050 47360

16 JOISTS 200X100 MM 45840 45930 47990 47270

17 CHANNELS 75X40 MM 45850 46660 47570 47310

18 CHANNELS 150X75 MM 45070 46120 46570 46400

19 PLATES 6 MM 47690 49320 49480 50210

20 PLATES 10 MM 47690 49320 49470 50210

21 PLATES 12 MM 48240 50150 49960 50790

22 PLATES 25 MM 48840 50670 50500 51430

23 H. R. COILS 2.00 MM 46870 49020 49750 49400

24 H. R. COILS 2.50 MM 45700 47910 48680 48340

25 H. R. COILS 3.15 MM 45650 47860 48680 48450

26 C. R. COILS 0.63 MM 51370 52700 53810 53210

27 C. R. COILS 1.00 MM 50460 52400 53140 52710

28 G. P. SHEETS 0.40 MM 55740 58230 58050 59680

29 G. P. SHEETS 0.63 MM 53590 54580 56250 58880

30 G. C. SHEETS 0.40 MM 54780 57800 56600 59710

31 G. C. SHEETS 0.63 MM 53790 55280 56180 58660

32 MELTING SCRAP H M S – I 22830 27500 31000 23630

33 MELTING SCRAP H M S – II 22170 26500 28700 23100

34 SPONGE IRON (COAL BASED) 22830 25500 25900 19430

NOTE: 1) All prices are in `/Ton and has been compiled on the basis of average of Main & Others producers’ price.2) Prices are inclusive of Excise Duty & Sales / Vat Tax3) All prices are as on 16 day of the month4) Prices are indicative.


PRODuCTIOn DATA

Source: Steel Ministry

Production, imports, exports, availability & apparent consumption (provisional) April-December 2013


(in ‘000 tons)

pRODuCERS

FINISHED STEEl

Non-Alloy Steel (Carbon) Alloy Steel Total

2013 - 14 (prov.) 2012 - 13 % Variation 2013 - 14

(prov.) 2012 - 13 % Variation 2013 - 14 (prov.) 2012 - 13 % Variation

SAIL 7771 7397 5.1 121 119 1.7 7892 7516 5.0

RINL 2031 1972 3.0 2031 1972 3.0

TSL 5520 4543 21.5 5520 4543 21.5

a) Prod. of Main Producers 15322 13912 10.1 121 119 1.7 15443 14031 10.1

ESSAR 3768 4527 -16.8 3768 4527 -16.8

JSW ISPAT 2857 2571 11.1 2857 2571 11.1

JSWL 9293 8463 9.8 181 201 -10.0 9474 8664 9.3

TOTAL - JSWL 12150 11034 10.1 181 201 -10.0 12331 11235 9.8

JSPL 1086 1280 -15.2 1086 1280 -15.2

b) Prod. of Major Producers $ 17004 16841 1.0 181 201 -10.0 17185 17042 0.8

Others 32423 31196 3.9 4092 4063 0.7 36515 35259 3.6

Less : IPT/Own Consumption 5966 5444 9.6 302 295 6268 5739

c) Total Production for Sale 58783 56505 4.0 4092 4088 0.1 62875 60593 3.8

d) Imports $ 3299 4394 -24.9 823 1388 -40.7 4122 5782 -28.7

e) Exports $ 3808 3147 21.0 317 467 -32.1 4125 3614 14.1

e) Availability (c+d-e) 58274 57752 0.9 4598 5009 -8.2 62872 62761 0.2

f) Variation in Stock -921 -341 -44 -15 -965 -356

g) Apparent Consumption (e-f) 59195 58093 1.9 4642 5024 -7.6 63837 63117 1.1

Less : Double Counting 7816 8280 1310 501 9126 8781

Consumption 51379 49813 3.1 3332 4523 -26.3 54711 54336 0.7


fERRO ALLOy DATA

Ferro alloys & metals price trendsSteel Insights Bureau

Base metals price trendsSteel Insights Bureau

Ferro Alloys January 2014 December 2013 November 2013

Ferro Silicon (Si - 70%)Ex-works `/ ton

74250 79000 77000

HC Ferro Chrome (Cr - 60%)Ex-works `/ ton

71250 73000 72250

HC Ferro Manganese (Mn - 70%)Ex-works `/ ton

58000 56050 53500

Silico Manganese (Mn - 60%, Si - 14%)Ex-works `/ ton

54250 55150 53500

MC Ferro Manganese (Mn - 70%, C - 1.5)Ex-works `/ ton

55500 78550 78250

Ferro Vanadium (V - 50%)Ex-works `/ kg

855 845 817

Ferro Moly (Mo - 60% min)Ex-works `/ kg

973 973 967

Ferro Titanium (Ti - 30%)Ex-works `/ ton

166000 166000 161000

Non Ferrous Metals January 2014 December 2013 November 2013

AluminiumEx-works `/ ton

140650 139400 139150

CopperEx-works/Ex-Godown `/ ton

485986 482077 482077

LeadUSD/Ton

2136 2240 2041

ZincUSD/Ton

2008 2105 1856

TinUSD/Ton

22000 22800 22685

NickelUSD/Ton

14260 14015 13390


Tear along the dotted lineTear along the dotted line

EDITORIAL - coaljunctioncoaljunction.in/appuploads/file/metaljunction/SI_Feb_14.pdfSteel Insights, February 2014 3 Dear readers, The year 2014 has brought with it some “good news”

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